(Bloomberg) — A global advance in stocks looked set to continue in Asia on Friday on optimism that the world economy will shrug off the outbreak of the omicron virus strain and keep expanding next year.
Australian shares climbed, while futures for Japan and Hong Kong rose. The S&P 500 hit a record, with nearly all major sectors in the green. Volumes have thinned and a number of markets are closed or operating with reduced hours on Christmas Eve.
Economic data painted a picture of solid U.S. growth. Consumer sentiment improved, new home sales increased, durable goods orders beat forecasts and jobless claims signaled further labor market healing. But inflation-adjusted consumer spending stagnated, flagging risks from rapidly rising prices.
Sentiment was helped by a U.K. study suggesting omicron infections are less likely to lead to hospitalization. But the research cautioned the variant may still produce a significant number of serious cases because it is so infectious.
Investors shifted from havens toward riskier assets. Treasury yields rose, the dollar slipped and the yen retreated. Crude oil pushed up toward $74 a barrel and Bitcoin breached $50,000 for the first time in almost two weeks. There is no cash trading of Treasuries on Friday.
A global stock gauge is up some 3% this month, illustrating the equity market’s resilience in the face of risks from the coronavirus and moves to tighten monetary policy to quell high inflation. A background of receding central bank liquidity support could test markets next year.
“We certainly favor value into 2022 over growth, and are much more on the short duration side both when we look at equities and fixed income,” Cheryl Pate, portfolio manager at Angel Oak Capital Advisors LLC, said on Bloomberg Television.
She added that U.S. inflation could move still higher and that the Federal Reserve faces a delicate balancing act to check price pressures while maintaining the economic recovery.
Inflation Dangers
Former Treasury Secretary Lawrence Summers warned of a testing period for the U.S. economy in coming years, with the risk of recession followed by stagnation. Summers said the Fed had been late to spot the dangers of inflation.
Omicron “will create some slowdowns in the economy, perhaps some slowdowns of production which could add to inflation pressures in the short term,” Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said on Bloomberg Television. But that will fade and the economy will work its way through the situation, he said.
Elsewhere on the virus front, Merck & Co.’s Covid-19 pill was cleared by U.S. regulators, giving high-risk patients another at-home treatment option.
But two doses and a booster of the vaccine made by China’s Sinovac Biotech Ltd. — one of the most widely used in the world — didn’t produce sufficient levels of neutralizing antibodies to protect against omicron, a laboratory study found.
Meanwhile, Macau-linked casino shares rallied after authorities released favorable results from public hearings on the renewal of licenses in the world’s largest gambling market.
What to watch this week:
- Friday: U.S. markets are closed. U.K. markets close earlier
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- Australia’s S&P/ASX 200 index increased 0.6% as of 8:13 a.m. in Tokyo
- The S&P 500 rose 0.6%
- The Nasdaq 100 climbed 0.8%
- Nikkei 225 futures added 0.4%
- Hang Seng futures advanced 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was at $1.1327
- The Japanese yen was at 114.42 per dollar
- The offshore yuan was at 6.3754 per dollar
Bonds
- The yield on 10-year Treasuries advanced four basis points to 1.49%
Commodities
- West Texas Intermediate crude rose 1.4% to $73.75 a barrel
- Gold was at $1,808.36 an ounce
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