HONG KONG: Asian markets mostly rose Tuesday as hopes for the long-term global outlook held sway over worries about the fast-spreading Delta variant and expectations the Federal Reserve will soon begin withdrawing its vast financial support.
While vaccinations are being rolled out, infection rates continue to climb around the world, forcing some governments—particularly China and Australia—to impose fresh lockdowns and other containment measures, reports AFP.
However, at the same time, the US recovery appears to be on track, with the economy adding more than 1.8 million jobs in June and July and some of the world’s top companies reporting healthy earnings.
With inflation hitting multi-year highs, the Fed is coming under pressure to prevent prices from running away by tapering the ultra-loose monetary policies put in place at the start of the pandemic, with forecasts for an interest rate hike in late 2022.
On Monday, Atlanta Fed President Raphael Bostic said the bank’s goals of taming unemployment and long-term hot inflation were close.
“We are well on the road to substantial progress toward our goal,” he told reporters, calling July’s blockbuster jobs figures “definitely quite encouraging in that regard”.
Analysts said the likelihood that the Fed will taper its vast bond-buying scheme was strong. US inflation figures due Wednesday are being keenly awaited.
After a tepid lead from Wall Street, most of Asia enjoyed gains.
Hong Kong led the pack, rising more than one percent as Chinese tech firms—which have been battered in recent weeks by Beijing’s crackdown—saw some much-needed buying interest, while Shanghai also enjoyed healthy gains.
Tokyo and Singapore were both in the green as they reopened after a three-day weekend, while Sydney, Wellington, Mumbai and Bangkok were also in the green.
Seoul, Taipei, Manila and Jakarta were lower. London, Paris and Frankfurt edged higher at the open.
There remains a feeling that while Delta is a worry, it will only delay the recovery and that the outlook for markets is broadly positive.
“What we are experiencing right now is a pause in the recovery,” Loreen Gilbert, of WealthWise Financial, told Bloomberg TV. “Investors should expect some volatility in the markets as we sort out what the Fed is going to do, as we sort out the Delta variant.”
Oil rallied more than one percent after suffering recent heavy losses fuelled by fears about the impact of Delta-enforced lockdowns on demand, and ahead of the monthly meeting of OPEC and other key producers this week that will also be closely followed.
“The oil market is still in deficit but demand risks and a possible resurgence of Iranian crude is keeping prices heavy,” said Edward Moya. “A stronger dollar theme is starting to emerge given the recovery story in the US and that might be a short-term drag for crude prices.”