© Reuters. File photo: On February 26, 2020, outside a brokerage company in Tokyo, Japan, a man wearing a protective mask talks on his mobile phone in front of a screen displaying the Nikkei Index. REUTERS/Athit Perawongmetha/Doctor of Archives
Author: Tom Westbrook
SYDNEY (Reuters)-Asian stock markets started weakly on Monday, while oil prices and the euro were under pressure as Europe’s re-implementation of COVID-19 restrictions and discussions on the Federal Reserve’s accelerated downsizing have kept investors on guard.
Due to oversupply concerns, oil futures fell about 1% at the opening, falling to seven-week lows of US$78.05 and US$74.76, respectively.
The Australian stock market fell 0.4%, led by declines in bank stocks. Down 0.3%, the MSCI Asia-Pacific stock market’s broadest index was flat.
“There is a question mark about the resilience of the European and European economies, which has been exacerbated by protests and infection rates over the weekend,” said Rodrigo Catril, a strategist at National Australia Bank (OTC:) in Sydney.
“In this context, it is difficult to see any damage to the U.S. dollar,” he said, adding that recent strong US data and hardline comments by Fed officials have further highlighted this view.
The euro fell 0.2% to US$1.1280 against the US dollar, close to a 16-month low. As investors bet that the European economy is far behind the recovery of the United States, the euro has been the main driver of the market in recent trading days.
Safe-haven assets such as bonds, gold and the yen have also benefited from the cautious tone of the financial markets recently.
On Monday, the yield on the benchmark 10-year US Treasury note stabilized at 1.5634%. Gold found support at $1,845 per ounce. The yen is hovering at 114.09 against the dollar.
The risk-sensitive Australian dollar also fell to a seven-week low of $0.7227. The South Korean stock market is an outlier, because chip makers follow the United States and the demand for memory chips has a bright future.
The Wall Street Index rose 0.2% after falling Friday.
Due to Thanksgiving in the United States, trade may be reduced this week, but the cautious tone has made traders pay attention to COVID-19 cases in Europe again and pay close attention to central bank spokespersons, especially in the United Kingdom and Europe.
Austria began its fourth blockade on Monday-neighboring Germany warned it might follow suit-because protests against restrictions have taken place across the European continent.
It is expected that surveys in Europe and the UK this week will show a downward trend in output and sentiment.
Jane Foley, head of foreign exchange strategy at Rabobank, said: “The combination of COVID, economic growth and geopolitical concerns in the Eurozone supports safe-haven assets.”
“The recent break below the $1.15 level and the subsequent decline forced us to further lower our forecast for the currency pair,” she added, and expects the currency pair to remain near $1.12 by the middle of next year.
At the same time, the US economy’s stronger-than-expected retail sales data and high inflation in recent weeks have surprised analysts. The focus this week is on prices and labor markets, and how the Fed might handle their strength.
Fed Vice Chairman Richard Clarida said last week that the accelerated pace of reduction may be worth discussing at the December meeting. The minutes of the Fed meeting will expire on Wednesday.
As expected, China kept its benchmark corporate and household loan interest rates unchanged for the 19th consecutive month on Monday.
The central banks of South Korea and New Zealand are expected to raise interest rates this week, and the swap market predicts that the probability of a 50 basis point hike in New Zealand is about 40%.
After publishing its worst week in two months last week, the company was under pressure and the final price was $58,180.