HONG KONG: Asian markets were mixed Wednesday after the previous strong run-up, with profit-taking playing against vaccine prospects and renewed hopes for a fresh US stimulus.
With several pharma giants submitting their inoculation drugs for regulatory authorisation in the US and Europe, there is optimism abound that the world economy can finally get back on course in 2021.
And in a sign that the outlook is improving despite the coronavirus still surging, the OECD said it expects this year’s contraction to be slightly less than previously forecast.
On Wall Street, the S&P 500 and Nasdaq each surged to fresh records as traders returned to buying after taking a breather Monday following a blockbuster November.
Asia struggled to build on Tuesday’s strong gains. Tokyo, Hong Kong, Shanghai, Sydney and Singapore drifted lower, though there were gains in Seoul, Taipei, Manila and Wellington.
Still, Kathryn Rooney Vera at Bulltick LLC told Bloomberg TV: “Markets are closing out a phenomenally volatile year in a euphoric manner. Markets are in a full bull scenario.”
While vaccine hopes — and the expected economic recovery they fuel — continue to be the main driver for equities, investors were given an extra boost Tuesday when a bipartisan group of lawmakers offered a $908 billion compromise to pass a much-needed US rescue package.
The move comes amid fears that millions of Americans will lose crucial financial support over the festive period.
Senate Majority Leader Mitch McConnell put to his Republican party a proposal offering $500 billion in relief, including $332 billion for small businesses, saying “waiting until next year is not an answer”.
– ‘Hope for a brighter future’ –
President-elect Joe Biden unveiled his economic team and called for immediate relief, while his Treasury secretary nominee Janet Yellen warned that “inaction will produce a self-reinforcing downturn causing yet more devastation”.
“So many people are struggling to put food on the table and pay bills and rent. It’s an American tragedy,” she said.
Meanwhile, current Treasury boss Steven Mnuchin and Federal Reserve chief Jerome Powell again urged Congress to provide more aid.
Powell, with an eye on fiscal conservatives, stressed that the “risk of overdoing it” is far outweighed by the risk of not doing enough.
“Additional fiscal relief would really help to guard against” a worse downturn, he added.
The OECD club of wealthy countries predicted the world economy would shrink 4.2 percent this year, slightly better than the 4.5 percent previously tipped, but added it would grow a similar amount in 2021.
Its chief economist Laurence Boone said “there is now hope for a brighter future”.
However, there is less optimism on oil markets, with both contracts dropping after OPEC and other major producers failed to reach an agreement on extending output cuts that have provided support to the commodity through the pandemic.
They said they would meet again on Thursday.
“The timing could not have been worse for OPEC+ to drop the ball given the moon shoot reflationary (period) unfolding in what could very well be the start of a December to remember,” said Axi strategist Stephen Innes.
