By YURI KAGEYAMA Business Writer AP
TOKYO (AP) – Asian stocks were mixed on Wednesday amid nervous trading amid concerns over the latest variant of the coronavirus.
Japan’s benchmark Nikkei 225 rose 0.8% in morning trading to 28,062.99, after turning earlier in the session. South Korea’s Kospi jumped 1.1% to 2,869.67. The Australian S & P / ASX 200 fell 0.4% to 7,229.40. The Hong Kong Hang Seng gained 1.3% to 23,787.71, while the Shanghai Composite was little changed, falling less than 0.1% to 3,563.03.
The detection of the omicron variant in Japan, as well as Brazil, announced on Tuesday, has raised concerns that new measures to contain infections will stifle tourism and other economic activities. Experts say it may be weeks before they know in more detail whether the omicron variant is causing serious illness.
Anderson Alves, a trader at ActivTrades, said Asian markets were nervous after a day’s drop on Wall Street and comments from Moderna CEO that existing COVID-19 vaccines may be less effective with omicron than previous variants.
“Traders will be looking for new information regarding the new variant and its impact on the current vaccine framework,” Alves said.
Wall Street’s losses worsened after the Federal Reserve chief said he would consider ending his support for financial markets sooner than expected.
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The S&P 500 fell 1.9%, erasing its gains from a day earlier. The sale accelerated after Fed Chairman Jerome Powell told Congress the central bank could stop the billions of dollars in bond purchases it makes every month “maybe a few months more.” early “. He was on track to complete the purchases, intended to boost the economy by lowering rates on mortgages and other long-term loans, in June.
Ending the purchases would open the door for the Fed to raise short-term interest rates from their all-time high of near zero. This in turn would dilute a major propellant that has sent inventory to record highs and allayed concerns about an overpriced market. As investors raised expectations for the Fed’s first rate hike following Powell’s remarks, yields on short-term Treasuries rose.
Losses for stocks rose rapidly, with the Dow Jones Industrial Average falling more than tripling in half an hour as it fell 711 points. The blue chip index ended down 652.22 points, or 1.9%, at 34,483.72.
The Nasdaq composite held up slightly better than the rest of the market, losing 245.14 points, or 1.6%, to 15,537.69. Higher interest rates tend to hurt stock prices overall, but they hit hardest those who are considered the most expensive or who rely the most on significant earnings growth going forward. These companies play a bigger role in the Nasdaq than the other indices. Microsoft fell 1.8% and chipmaker Nvidia slipped 2.1%.
The big blow to interest rates came after stocks were already weak in the morning amid concerns about the severity of the rapid spread of the omicron variant of the coronavirus may hit the global economy.
Much remains to be seen on the variant, including how much it can slow down already gutted supply chains or scare people out of stores. This uncertainty has sent Wall Street through jolts up and down as investors struggle to limit the economic damage that Omicron will eventually cause.
âThere will be increased volatility around any news,â said Kristina Hooper, chief global markets strategist at Invesco. She said the markets would likely remain cautious “until we find out more.”
The S&P 500 lost 88.27 points to 4,567. The benchmark fell 2.3% on Friday for its worst loss since February, only to rise 1.3% on Monday as investors reconsidered if the reaction was overblown, before giving way to Tuesday’s loss. The index closed the month of November with a loss of 0.8%. This follows a gain of 6.9% in October and a decline of 4.8% in September. The index is now up 21.6% for the year.
A measure of stock market nervousness jumped nearly 19% on Tuesday, approaching its level on Friday, when it hit its highest level since March. Much of the increase occurred after Powell started speaking.
Gold generally does well when investor fear increases, but its price has fallen 0.5%. Higher interest rates could reduce the attractiveness of gold, which pays no interest to its holders.
If omicron ends up causing heavy damage to the global economy, it could put the Federal Reserve in a difficult position. Usually, the central bank will lower interest rates, which encourages borrowers to spend more and investors to pay higher prices for stocks.
But low rates can also encourage inflation, which is already high across the global economy. Powell acknowledged in his testimony to Congress that inflation has been worse and has lasted longer than the Fed expected. For months, officials have described inflation as only “transient,” but Powell said that word no longer worked.
Subsequent losses for stocks on Tuesday were widespread, with all but seven S&P 500 stocks ending lower. Apple rose 3.2% for the biggest gain in the index.
Small stocks also suffered heavy losses. The Russell 2000 Index slipped 43.07 points, or 1.9%, to 2,198.91. Investors generally see them hit harder than their bigger rivals by both higher interest rates and a weaker US economy.
A signal in the bond market also showed some concern about the outlook for the economy. Longer-term T-bills generally offer higher yields than shorter-term T-bills, in part to offset the increased risk that future inflation could eat away at their yields.
A 10-year Treasury still offers more yield than a two-year Treasury, but the gap narrowed sharply on Tuesday. The two-year yield rose to 0.54% from 0.51% on Monday night. The 10-year yield, meanwhile, fell to 1.45% from 1.52%.
In energy trading, benchmark US crude added $ 1.42 to $ 67.60 per barrel. Brent crude, the international standard, fell from $ 2.87 to $ 70.57 per barrel.
In currency trading, the US dollar gained 113.44 Japanese yen against 113.18 yen. The euro cost $ 1.1322, compared to $ 1.1339.
AP Business editors Damian J. Troise, Stan Choe and Alex Veiga contributed.
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