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Asian Stocks Down; Omicron, Reduced Central Bank Support Risks Remain

Published 14/12/2021, 03:22
© Reuters.

By Gina Lee

Investing.com – Asia Pacific stocks were down on Tuesday morning, with caution lingering about the economic risks posed by potentially reduced central bank support and the omicron COVID-19 variant.

Japan’s Nikkei 225 was down 0.46% by 9:07 PM ET (2:07 AM GMT) and South Korea’s KOSPI was down 0.36%.

In Australia, the ASX 200 was down 0.24%.

Hong Kong’s Hang Seng Index Index slid 1.04%.

China’s Shanghai Composite was down 0.56% and the Shenzhen Component was down 0.39% after a plunge in developer Shimao Group Holdings Ltd.’s bonds and shares.

Meanwhile, the U.S. Federal Reserve will hand down its policy decision on Wednesday. Other key central banks, including the European Central Bank (ECB), the Bank of England (BOE), and the Bank of Japan, will hand down their policy decisions during the week.

Some investors were cautious ahead of the policy decisions.

“Volatility will remain elevated throughout all of this week’s rate decisions from the Fed, ECB, and the BOE,” Oanda Corp. senior market analyst Edward Moya said in a note.

“2022 is still expected to be a strong global growth story, but accelerated central bank hawkishness could be the one thing that helps deliver the first major pullback with U.S. equities.”

Other investors agreed.

“It has been a strong year, we expect it to end strong, but investors have to be careful with bubble assets,” ERShares chief investment strategist Eva Ados, told Bloomberg.

“The worst when it comes to inflation is behind us. Asset tapering has been somehow baked in. We are cautiously optimistic, but there are many risks on the horizon too.”

Omicron concerns were on the rise again after the World Health Organization warned that the variant poses a "very high" global risk, with some evidence that it evades vaccine protection. However, it added that clinical data on its severity is limited.

China reported its first omicron case, while the number of COVID-19 cases in the U.S. topped 50 million.

On the data front, the U.S. producer price index is due later in the data, with Chinese data, including industrial production and retail sales, due on Wednesday.

Investors are also bracing for Friday’s “quadruple witching” day in U.S. markets, when options and futures on indexes and equities expire. S&P Dow Jones Indices quarterly rebalance will also come into effect after markets close on the same day.

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