- Asian equities trade mixed as virus woes, geopolitical fears battle softer yields.
- South Korea, Japan oppose North Korea’s missile tests, Tokyo extends border restrictions until February.
- Retail Sales from Australia, Indonesia improved but markets await Fed’s Powell, inflation for clear direction.
- Hong Kong eyes another stimulus to battle the pandemic but China woes limit Hang Seng’s upside.
Asian shares traded mostly lower, sidelined of late, as cautious optimism at the broader front failed to ignore virus woes and geopolitical tensions inside the region.
That said, the MSCI’s index of Asia-Pacific shares ex-Japan rises 0.30% while Japan’s Nikkei begins trading week with 0.90% intraday losses heading into Tuesday’s European session.
Although Japan’s quarterly survey of spending hints at stronger inflation going forward, news suggesting the extension of border restrictions in Japan weigh on the quote. Japan’s Prime Minister (PM) Fumio Kishida announced, per Kyodo News, “The Japanese government will further extend an entry ban on non-resident foreigners until the end of February.” The news also adds, “The ban has been in place since Nov. 30 after the country confirmed its first case of the highly transmissible Omicron variant of the coronavirus.”
Elsewhere, North Korea’s second missile test in nearly a week pushes Japan and South Korea to raise their agitation in front of the United Nations (UN). However, China and Russia defend the hermit kingdom, indirectly, while pushing the UN to ease economic sanctions over Pyongyang.
Additionally, China announces the virus-led lockdown for a second city and drowns the stocks in Beijing. It’s worth noting that Hong Kong to roll out covid fund to support affected industries, which in turn helps Hang Seng to print mild gains even as Beijing-linked news probe the bulls.
Talking about data, Retail Sales figures from Australia and Indonesia improved for November. Though, neither Australia’s ASX nor Indonesia’s IDX Composite manages to ignore intraday losses.
On a broader front, hawkish comments from Fed Chair Jerome Powell, per the prepared remarks for today’s Testimony, join update on Merck’s covid treatment, to favor the risk-on mood of late.
The Fed Boss said, “The economy is growing at its fastest rate in years, and the labor market is robust.” However, his pledge to stop higher inflation from getting entrenched keeps the rate hike concerns on the table and weighs on the sentiment. It’s worth noting that comments from Merck’s official saying, “Expect Molnupiravir mechanism to work against omicron, any covid variant,” could be cited as positive for the risk appetite.
Against this backdrop, the US 10-year Treasury yields dropped 1.5 basis points (bps) to 1.757% after rallying to January 2020 levels during the previous day, before closing in negative on D1. Further, the 2-year bond coupons remain steady around March 2020 levels, near 0.90% at the latest. Additionally, S&P 500 Futures print 0.07% intraday gains.
That said, market plays are likely to remain divided ahead of Wednesday’s US inflation data. However, today’s testimony from Fed Chair Powell will be important to watch.