Asian shares drift from highs, bonds count on Fed support

by Jonathan Adams
Asian shares

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6%, the Dow was lower 1.16%, the S&P 500 shed 1.16%, and the Nasdaq fell 0.82%

Asian shares drifted off all-time highs on Thursday as widening COVID-19 restrictions in the United states weighed on Wall Street, while bonds were underpinned by speculation the Federal Reserve would have to respond with yet more easing.

Japan also reported record new cases as Tokyo raised its pandemic alert to the highest level, shoving the Nikkei down 0.8% and away from a 29-year closing top.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%, off their historic high. Chinese blue chips added 0.4% as President Xi Jinping vowed to cut tariffs and expand imports of high-quality goods and services.

E-Mini futures for the S&P 500 steadied after Wall Street took a late dip on Wednesday. The Dow ended down 1.16%, while the S&P 500 lost 1.16% and the Nasdaq 0.82%.

Pfizer Inc shares had gained after the drugmaker said its COVID-19 vaccine was 95% effective and it would apply for emergency U.S. authorization within days.

Pfizer’s announcement came on the heels of a similar report from Moderna Inc.

Yet, the U.S. death toll still neared a world record of a quarter million as government officials in dozens of states weighed or implemented shutdown measures.

The vaccines news are a positive medium-term impulse for the global economic outlook and investors are trying to weigh that against the prospect of an imminent stalling of the European and U.S. recovery amid the prospect of extensions of current lockdown measures, said Rodrigo Catril, a senior FX strategist at NAB.

The drag from new U.S. restrictions was only amplified by the total lack of progress on a fiscal stimulus bill, fuelling speculation the Federal Reserve would have to expand its asset-buying campaign at a December policy meeting.

Two top Fed officials on Wednesday held out the option of doing more.

The chance of further easing has helped nudge 10-year Treasury yields down to 0.85% and away from an eight-month top of 0.975% touched last week.

It has also weighed on the dollar, which slipped for five sessions in a row before steadying a little on Thursday. Against a basket of currencies it was last at 92.477, still close to recent lows of 92.129.

The dollar has likewise been in a slow decline against the Japanese yen to reach 103.72 and was approaching the recent eight-month trough at 103.16.

The euro has had pandemic problems of its own as lockdowns spread across the continent, keeping it capped at $1.1844 and short of the recent peak of $1.1919.

Sterling dipped to $1.3230 as Brexit talks dragged on. The Times reported Europe’s leaders would demand the European Commission publish no-deal plans as the deadline neared.

Bitcoin, sometimes regarded as a safe haven or at least a hedge against inflation, rose to more than $18,000 for the first time in nearly three years. It last stood at $17,808.

All the talk of policy easing put a floor under gold prices, leaving the metal steady at $1,868 an ounce.

Oil prices eased as virus restrictions hit fuel demand across Europe and the U.S.

U.S. crude fell 35 cents to $41.47 a barrel, while Brent crude futures lost 23 cents to $44.11.

This article is for information purposes only.
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