HONG KONG – Asian markets drifted today with investors biding their time ahead of a hotly anticipated US Federal Reserve meeting, though Hong Kong and Shanghai retreated again on concerns about China's economy as leaders struggle to contain a new wave of Covid infections.
A third straight day of records for Wall Street's three main indexes and a first all-time high for 21 years in Paris – fanned by strong earnings – were unable to provide much inspiration in the face of long-running fears about surging inflation and the prospect of higher interest rates.
With prices rising at rates not seen for years, central banks are being forced to row back the vast financial support put in place at the start of the pandemic, and which have been credited with sending equities to records and helping the economic recovery.
While some have already lifted borrowing costs or started to tighten the purse strings, the main focus is on the Fed, which is expected to say today when it will begin tapering its own massive bond-buying programme with particular attention on rates.
The big question will be whether they will signal anything about when the rate hikes will start,” said Jeanette Garretty, at Robertson Stephens Wealth Management. “I think they are going to try and avoid that,” she told Bloomberg TV.
The Bank of England is seen as likely to announce a rate rise at its meeting tomorrow.
In early trade, Asian markets were mixed, with Sydney, Wellington, Taipei, Manila and Jakarta rising but Singapore and Seoul falling.
Hong Kong and Shanghai sank again, with the latest Covid spike in several parts of China forcing some cities into fresh lockdowns that have led to fresh worries about the impact on already strained supply chains and the world's number two economy.
Stresses in the country were highlighted Monday when the government urged people to stock up on daily necessities and for authorities to take steps to ensure adequate food supplies as containment measures were introduced.
An outbreak in the summer has been blamed for dragging on growth in the third quarter and the closing of factories again will further flame fears about the recovery outlook.
The country's Premier Li Keqiang warned yesterday that the economy faced more headwinds and said taxes would have to be cut to support small and medium-sized companies.
The crisis comes as prices at the factory gates as well as energy costs in China soar, meaning leaders have to find a way to nurture growth while at the same time keeping a lid on inflation.
“While Premier Li did not say what was driving the ‘downward pressure’ the regulatory crackdown and the woes in the property sector are prime candidates, as is China's zero-Covid policy, which is seeing restrictions put back in place in many provinces,” said National Australia Bank's Tapas Strickland. – AFP, November 3, 2021
