(Bloomberg) — Asian stocks looked set to follow their U.S. peers lower as traders weighed the economic threat of virus restrictions against optimism about the efficacy of vaccines. Treasuries gained.
Futures pointed to modest declines in Japan and Hong Kong, and Australian shares slipped. Futures on the S&P 500 and Nasdaq 100 were little-changed after the gauges retreated Thursday, ending a three-day rally amid losses in the consumer discretionary and real estate sectors. Treasuries pared back a rally after a lackluster sale of 30-year bonds. Oil fell toward $70 per barrel and Bitcoin fell. The dollar rose.
Chinese markets will be in focus after China Evergrande Group and Kaisa Group Holdings Ltd. officially defaulted on their dollar debt, while the central bank raised its foreign currency reserve requirement ratio for a second time this year after the yuan climbed to the highest since 2018. The move prompted the offshore yuan to decline the most since July.
Investors are mulling the cost to contain the omicron strain amid mounting concern it will crimp the economic rebound. A study has found omicron is 4.2 times more transmissible than the delta variant in its early stages.
“Ultimately the issue from a health perspective is that even if Omicron does prove to be less severe — which the initial indications so far have pointed to — a rise in transmissibility could offset that,” said a team of Deutsche Bank strategists including Jim Reid. That could mean that more people are in the hospital, “even if a lower proportion of them are severely affected.”
Meanwhile, the global equity rally faces further potential road bumps ahead from U.S. consumer inflation numbers on Friday and a Federal Reserve meeting next week that may provide clues on the pace of tapering and interest rate increases.
Elsewhere, the dollar rose Thursday after a report showed applications for U.S. state unemployment benefits declined to the lowest level since 1969. However, economists flagged difficulties in seasonal adjustments to arrive at that figure.
Bloomberg’s Markets Live team is running a survey on asset views for 2022. It’s anonymous, takes about 2 minutes, and the results will be shared in the latter part of December. To participate, click here.
Here are some key events to watch this week:
- U.S. CPI Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets as of 8:06 a.m. in Tokyo:
Stocks
- Nikkei 225 futures fell 0.3%.
- Hang Seng futures fell 0.2% earlier.
- S&P 500 futures gained 0.1%. The index fell 0.7% Thursday.
- Nasdaq 100 futures rose 0.1%. The benchmark fell 1.5% Thursday.
- The S&P/ASX 200 dropped 0.4%.
Currencies
- The Bloomberg Dollar Spot Index rose 0.3% Thursday.
- The euro was little-changed at $1.1295
- The Japanese yen was little-changed at 113.45 per dollar
- The offshore yuan was at 6.3792.
Bonds
- The yield on 10-year Treasuries declined two basis points to 1.50% Thursday.
Commodities
- West Texas Intermediate crude fell 0.4% to $70.63 a barrel.
- Gold was flat at $1,775.94 an ounce.
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