Asian stocks dip as Omicron spreads, Fed decision looms

Sydney, Dec. 14 (BNA): Asian stocks and oil prices fell on Tuesday as the spread of the variable Omicron coronavirus stoked investors who were already on edge ahead of a series of central bank decisions this week, including a key meeting of the Federal Reserve.

MSCI’s broadest index of Asia Pacific shares outside Japan was down 0.46%.

China’s CSI300 index was also down 0.41%, after health authorities in mainland Tianjin discovered the country’s first omicron case.

China’s major industrial province of Zhejiang is also battling its first batch of COVID-19 this year, with tens of thousands of citizens in quarantine and virus-affected areas suspending business operations, according to Reuters.

The combination of economic risks from the Omicron variant and a more hawkish tone from the Federal Reserve on Wednesday reduced risk appetite.

said John Milroy, a consultant at Ord Minnett in Sydney.

“I think there are reasons to expect the money to come back in a little bit, with the expectation that the beginning of 2022 will be a volatile period.”

Hong Kong’s Hang Seng Index is down 1%, South Korea’s Kospi is down 0.4%, Japan’s Nikkei is down 0.13%, and Australian shares are down 0.31%.

On Wednesday, the Federal Reserve is expected to signal a faster rollback of its $120 billion per month bond-buying program in a move to combat high inflation, which could push it another step to raise interest rates.

The dollar rose ahead of upcoming meetings, as investors look to the possibility that the Federal Reserve will start raising interest rates in 2022.

“Volatility will remain elevated during all (these) decisions by the Fed, the European Central Bank and the Bank of England,” said Edward Moya, chief analyst at OANDA.

The European Central Bank, the Bank of England and the Bank of Japan are also meeting this week, and they are all heading towards normalizing their monetary policies.

Concerns about the Omicron variant of COVID-19 escalated after British Prime Minister Boris Johnson warned of a “tidal wave” of new cases, and the World Health Organization said it poses a “very high” global risk, with some evidence it is evading vaccine protection.

Oil futures fell as new doubts emerged about the efficacy of vaccines against the Omicron coronavirus variant, although OPEC expected in its monthly report that the impact of the variant on fuel demand would be mild.

Brent crude futures fell 83 cents, or 1.10%, to $74.32 a barrel, while US West Texas Intermediate crude fell 8 cents, or 0.11%, to $71.21.

The FTSE Index fell 0.83%, the STOXX 600 Index lost 0.43%, and the MSCI Stock Index fell 0.80%.

The Dow Jones Industrial Average fell 0.89% and the high-tech Nasdaq Composite Index fell 1.39%.

The dollar index rose 0.27%, with the euro down 0.01% to $1.1282, which is considered weak given expectations that the Federal Reserve will tighten policy faster than the European Central Bank.

The benchmark 10-year US Treasury yield fell on Monday and the yield curve edged lower as traders prepared to take on a hawkish Federal Reserve.

The yield on the 10-year Treasury fell 6.5 basis points to 1.424% and the yield on the 30-year Treasury fell 6.7 basis points to 1.817%.

HF