Asian markets mixed

18 May, 2021 12:00 AM printer

HONG KONG: Asian markets were mixed Monday as optimism about the global recovery was offset by concerns about a spike in new infections in several countries that have officials battling to avert new lockdowns.

Wall Street provided another strong lead after data showed US retail sales were flat last month, which helped ease traders’ fears that a surge in inflation could force the Federal Reserve to wind back its ultra-loose monetary policies sooner than expected, reports AFP.

However, a fall in consumer confidence owing to rising prices indicated the issue was unlikely to go away any time soon, and analysts said central bank officials had to tread a fine line between getting the economy back on its feet and keeping inflation under control.

“On the one side, we have the Fed’s view, apparently embraced by equity investors, implying there is nothing to see here, given that base effects and reopening dynamics mean we should expect volatility in the data and no one said reopening was going to be cheap,” said National Australia Bank’s Rodrigo Catril.

“On the other side of the argument... (are) rising concerns that inflation is becoming unanchored with a decline in consumer sentiment a reflection of the negative impact inflation is having on disposable income. So at what point does higher inflation become problematic for policy?”

Focus this week is on the release of minutes from the Fed’s latest policy meeting at the end of last month, which will be pored over for an idea about members’ views on inflation in light of surging commodity prices, supply bottlenecks and economic reopenings.

“Record highs in copper prices and fears over extended oil price gains will be hard to ignore” heading into the second half of the year, said Eric Robertsen at Standard Chartered.

“The Fed believes this is part of the economic reopening narrative” and will hold off making any moves now, he added. “But it might start looking over its shoulder if prices stay high.”

But CMC Markets analyst Michael Hewson added: “While the sharp rises being seen in headline (consumer price index) appear exceptional when viewed through the lens of the last decade, the increase in prices needs to be set within the context of the sharp deflationary shock seen just over a year ago.

“There was always likely to be a sharp rebound as businesses and supply chains readjust to the new reality that is likely to unfold over the next few months due to the pandemic which means that there are likely to be further bumps along the way.”

Hong Kong, Shanghai, Sydney, Singapore, Manila, Mumbai Wellington all rose.

However, Tokyo, Seoul, Bangkok, Jakarta and Taipei were all lower as some governments in the region struggle to contain new coronavirus cases.

The rise in infections has forced Taiwan to order stricter social distancing measures for the capital and surrounding areas, while Japan extended a state of emergency as calls grow for the Olympics to be scrapped.

And in Singapore, most in-school classes have been scrapped while an already once-delayed travel bubble planned for this month with Hong Kong has been put off again owing to a sharp pick-up in infections in the city. There are also worrying new outbreaks in Thailand and Malaysia.

London and Paris dipped in early trade, while Frankfurt edged up.

Bitcoin fell to $42,185 briefly, its lowest since February, after Elon Musk on Sunday appeared to suggest his Tesla carmaker may sell—or already had sold—its holdings in the cryptocurrency.