ASIA MARKETS: Shares, Currencies Fall On Growth, Inflation Worries

Monday,   06-Dec-2021   09:57 AM (IST)

Most Asian shares and currencies declined on concerns that less-accommodative central banks and the Omicron coronavirus mutation will hurt growth. Hong Kong paced the losses on Asian indexes, slipping 1.2%. Shares in Japan dropped 0.5% and were down 0.2% in Australia. Chinese equities outperformed, adding 0.6%. Futures on the S&P 500 Index were higher after the gauge dropped on Friday to extend weekly losses. The FTSE Bursa Malaysia KLCI Index fell 0.5% to 1,494.96, led by glovemakers. Top Glove slumped 6.7% and Hartalega Holdings lost 3.7%. Investors assessed the outlook for equities in the wake of indications that central banks policies were likely to be less supportive. Next week, the Federal Reserve is expected to increase the taper pace to $30 billion a month from the current $15 billion on worries over the inflation outlook. The disappointing U.S. job additions in November is not expected to make the Fed alter the course when it meets next week. The Fed is not the only central bank that is looking to withdraw stimulus to anchor inflation expectations. Despite the emergence of the Omicron threat, a few economists reckon that the Bank of England will raise interest rates this month. The Bank of Canada is not expected to make any changes to interest rates this week, but is tipped to raise borrowing costs quickly next year. The tightening by central banks comes at a time when growth is expected to slow down due to the Omicron threat. Goldman Sachs revised its U.S. GDP forecast for next year, saying it now expects a 2022 GDP growth of 3.8%, down from 4.2% previously predicted. Data this week could further cement expectations of a Fed that will be more aggressive in reducing accommodation. Headline U.S. consumer prices are expected to jump 6.7% year-on-year and the core measure is expected to increase 4.9%. The data comes in the wake of comments by the Fed Chair last week that risks around inflation have increased and policymakers will be discussing winding down bond purchases at a faster pace. Other Fed officials have indicated the same. The South Korean won and the Indonesian rupiah paced losses in Asian currencies, falling up to 0.4%. The Malaysian ringgit opened lower but managed to recover and was little changed. The dollar index rose to 96.25 and the 10-year Treasury yields inched higher after sliding on Friday to the lowest in two months.