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GLOBAL MARKETS-Asia stocks subdued, oil caps stellar year

GLOBAL MARKETS-Asia stocks subdued, oil caps stellar year

reuters.com · 12/29/2021 23:28
GLOBAL MARKETS-Asia stocks subdued, oil caps stellar year

Asian stock markets : https://tmsnrt.rs/2zpUAr4

Asia ex-Japan index flat, down almost 6% on year

Tech boom leads Wall St indices to record highs

Countries relax isolation rules as Omicron spreads

Oil looks to end year up by more than half

By Wayne Cole

- Asian shares flatlined on a slow Thursday as the spread of Omicron clouded what is the last trading day of the year for many exchanges, while oil was close to finishing 2021 with gains of more than 50%.

With coronavirus cases hitting record highs, many countries are trying to limit the economic damage by relaxing rules on isolation rather than resorting to lockdowns. nL8N2TE11Q

There was some positive economic data from South Korea where a 5.1% surge in November industrial output could signal an easing in global supply bottlenecks. nP8N2SK0AJ

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS were flat, leaving it down 6% on the year.

Chinese blue chips .CSI300 added 1.0% as Beijing signalled lower rates in 2022, though that was still off 5.5% for the year. nL1N2TF01D

Japan's Nikkei .N225 slipped 0.2%, giving it a modest gain of 4.6% for the year but short of a three-decade top reached in September. Tokyo is shut on Friday.

Taiwan .TWII was an outperformer with a rise of 24% for the year thanks to red-hot demand for computer chips amid limited supply.

BofA analyst Ajay Kapur sees some upside for Asian markets in the near term but is neutral from the second quarter onward given that is when global liquidity is likely to peak as the Federal Reserve stops buying assets.

He is also bearish on China on expectations the economy will continue to slow and company earnings disappoint.

S&P 500 futures ESc1 and Nasdaq futures NQc1 were all but steady, while EUROSTOXX 50 futures STXEc1 inched up 0.1% and FTSE futures FFIc1 dipped 0.1%.

Wall Street has had a stellar year thanks to upbeat corporate earnings and extraordinary helpings of policy stimulus. The S&P 500 .SPX is up a hefty 28% and looking at its strongest three-year performance since 1999.

The Nasdaq .IXIC is ahead by 22% on the year, though much of that is due to stratospheric increases in the value of just seven tech groups - Apple alone makes up 11% of the index.

Bond markets have been stressed by the persistence of U.S. inflation and a resulting hawkish turn by the Fed, with investors now pricing a first rate hike as early as March or May. FEDWATCH

Two-year yields US2YT=RR have shot up 55 basis points since September to stand at 0.75%, near the highest since March last year.

Longer-term bonds have suffered relatively less and the yield curve has flattened markedly, suggesting investors are wagering a more aggressive Fed now will mean slower inflation and growth in the future and a lower peak for rates.

On Thursday, 10-year yields US10YT=RR were up 6 basis points for the week at 1.55% but well below the 1.776% peak hit in April.

The Fed outlook has combined with safe-haven flows to underpin the U.S. dollar, though it ran into some profit taking overnight as the euro bounced to $1.1338 EUR= and away from a November trough of $1.1184.

Much of the action came in the yen, which has run into broad year-end selling over the past week or so. The euro reached its highest since mid-November at 130.57 yen EURJPY=, as did the dollar at 115.06 yen JPY=.

In commodity markets, gold eased to $1,801 an ounce XAU=, leaving it 5% lower for the year.

Oil prices rose after government data showed U.S. crude inventories fell last week, offsetting concerns that rising coronavirus cases might reduce demand. O/R

That set the seal on a spectacular year for crude as Brent climbed more than 50% amid limited supplies, adding considerably to the global inflation pulse.

On Thursday, U.S. crude CLc1 was up another 23 cents at $76.79 per barrel, while Brent LCOc1 rose 20 cents to $79.43.

Asia stock marketshttps://tmsnrt.rs/2zpUAr4

Asia-Pacific valuationshttps://tmsnrt.rs/2Dr2BQA

(Editing by Shri Navaratnam and Raju Gopalakrishnan)

((Wayne.Cole@thomsonreuters.com; 612 9171 7144; Reuters Messaging: wayne.cole.thomsonreuters.com@reuters.net))

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