Asian shares mostly rise despite mounting omicron worries

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Asian shares are mostly higher amid nervous trading on latest coronavirus concerns

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Japan’s benchmark Nikkei 225 closed 0.4% higher at 27,935.62. South Korea’s Kospi jumped 2.1% to 2,899.72. Australia’s S&P/ASX 200 fell 0.3% to 7,235.90. Hong Kong’s Hang Seng was up 1.1% at 23,734.59, while the Shanghai Composite was up 0.4% at 3,576.89.

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Detection of the Omicron variant in Japan and other countries has raised fears that further measures to prevent infection could affect tourism and other economic activities. Experts say it could take weeks to better understand whether the Omicron type causes serious illness.

Andersen Alves, a trader at ActiveTrades, said Asian markets were nervous after an overnight drop on Wall Street and Moderna’s CEO remarks that the current COVID-19 vaccine is less effective against Omicron than earlier variants. can be.

“Traders will be looking for new insights about the new version and its impact on the existing vaccine framework,” Alves said.

The head of the Federal Reserve said Wall Street’s losses deepened that it would consider ending its support for financial markets sooner than expected.

The S&P 500 fell 1.9% to 4,567, eroding its gains the day before. The benchmark index sank 2.3% on Friday for its worst loss since February, only to rise 1.3% on Monday as investors reconsidered whether the reaction was over before giving way to Tuesday’s losses. In November, the index closed down 0.8%. This follows a 6.9% decline in October and 4.8% in September. The index is now up 21.6 percent for the year.

The sell-off intensified after Fed Chair Jerome Powell told Congress that the central bank could halt bond purchases worth billions of dollars each month “probably a few months ago.” It was on pace to complete purchases in June to cheer up the economy by slashing rates for mortgages and other long-term loans.

It would open the door for the Fed to raise short-term interest rates from its record low of nearly zero and ease a key factor that has sent stocks to record highs, fueling concerns about an overpriced market. doing away.

As investors raised their hopes for the Fed’s first rate hike following Powell’s comments, yields on short-term Treasuries soared.

The Dow Jones Industrial Average fell 1.9% to 34,483.72, while the Nasdaq Composite was slightly better than the rest of the market, falling 1.6% to end at 15,537.69. The Russell 2000 Index slipped 1.9% to 2,198.91.

The crisis on interest rates came as stocks were already weak in the morning due to concerns about how badly the fast-spreading Omicron version of the coronavirus could affect the global economy.

If Omicron ultimately causes huge damage to the global economy, it could land the Federal Reserve in trouble. Typically, the central bank will lower interest rates, which encourages borrowers to spend more and encourages investors to pay higher prices for shares.

But lower rates can also encourage inflation, which is already high in the global economy. Powell acknowledged in his testimony before Congress that inflation has been bad and lasted longer than the Fed expected. For months, officials described inflation as only “transient,” but Powell said the term no longer works.

A signal in the bond market was also showing some concern about the economy’s prospects. Long-term treasuries typically offer higher returns than shorter-term treasuries, partly due to the increased risk that future inflation can eat into their returns.

The 10-year Treasury is still offering a higher yield than the two-year Treasury, but that gap narrowed sharply on Tuesday. The two-year yield rose to 0.54% from 0.51% late Monday. Meanwhile, the 10-year yield fell to 1.45% from 1.52%.

Benchmark US crude in energy trading rose $2.12 to $68.30 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, it fell by $3.77 to $66.18 a barrel. Internationally, Brent crude fell by $2.46 to $71.69 a barrel.

In currency trading, the US dollar rose from 113.11 yen to 113.42 Japanese yen. The price of the euro increased from $1.1337 to $1.1340.

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