With London, Tokyo and Shanghai closed for holiday, traders elsewhere diverged ahead of more company results and US unemployment figures later this week.
Investment giant Warren Buffett instilled some unease after saying at the weekend that he expected the US economy was in “super high gear” thanks to massive Federal Reserve and government support but that it would fan inflation.
He said “people have money in their pocket and they’re paying higher prices” and there was more inflation than expected six months ago.
His comments revived concerns that the explosive recovery, vaccinations and easing of lockdowns would push up prices to the extent that the Fed would have to ease up on its market-supportive, ultra-loose monetary policies.
Those worries continue to hover over trading floors despite Fed boss Jerome Powell’s repeated insistence that they will not tighten policy until they are happy that unemployment has been tamed and inflation is running consistently hot for some time.
However, Dallas Fed president Robert Kaplan broke ranks with Powell on Friday as he said tapering could soon be considered.
“We’re now at a point where I’m observing excesses and imbalances in financial markets,” he said.
“I’m very attentive to that, and that’s why I do think at the earliest opportunity I think will be appropriate for us to start talking about adjusting those purchases.”
National Australia Bank’s Ray Attrill said in a note: “The main overarching rationale remains on the pace of the recovery which he sees as being much faster than he previously expected and now forecasts unemployment at 4 percent by year’s end.
“If that scenario plays out, it is also conceivable rate rises may start earlier, with Kaplan stating the Fed may need to raise rates next year.”
Paris and Frankfurt stock markets were up at midday.
But Hong Kong and Singapore were down more than one percent, while Taipei shed two percent. There were also losses in Seoul, Mumbai, and Jakarta though Wellington was up. Sydney and Manila were flat.
The losses came despite data showing a better-than-forecast jump in factory activity in Australia, Indonesia, Malaysia and Taiwan.
“Traders believe that it is highly likely that the global stock market, especially the US stock, could face some correction as we have seen three consecutive months of gains,” said Naeem Aslam, chief market analyst at AvaTrade.
Investors are also concerned about the rising number of Covid cases in India and how it could affect the global economy, Aslam said.
Traders will be keenly watching the release of US jobs data this week, which will provide the latest snapshot of the world’s top economy and its recovery.
The jobs figure “is what matters the most this week, and investors will be looking at this data through the Fed’s lens,” Aslam said.
Oil prices fell further, having shed around two percent on Friday on concerns that the frightening coronavirus surge in India will hit demand in the huge economy.
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