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Overnight Asia

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Asian stocks were steady and US equity futures climbed Thursday, shrugging off a weak Wall Street close amid questions about how much of a threat the Omicron Coronavirus strain really poses.

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MSCI Inc.’s Asia-Pacific gauge edged up, while S&P 500 and Nasdaq 100 contracts rose and European futures slipped. The World Health Organization said vaccines will likely protect against severe cases of the variant and Australia’s chief medical officer said there’s no indication the variant is deadlier than other strains.?In Hong Kong, an index of Chinese technology shares retreated amid Beijing’s plan to close a loophole used by tech firms to list abroad. Some suppliers to Apple Inc. slid on a report that the firm informed component suppliers of weakening demand for the iPhone 13 lineup.

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American markets on Wednesday were buffeted by the first confirmed US case of Omicron and Federal Reserve Chair Jerome Powell’s reiteration that officials should consider a faster reduction of monetary stimulus amid high inflation.?But the mood was better in Asian hours, evidenced by less demand for havens: Treasuries fell, the Dollar slipped and the Yen declined. Meanwhile, Turkey’s Lira weakened after President Recep Tayyip Erdogan abruptly replaced his finance minister.?Investors are braced for volatility to continue through December, stirred by tightening Central Bank policies to fight inflation just as the Omicron variant complicates the outlook for the pandemic recovery. Many questions about the strain remain unanswered.

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While the knee-jerk reaction of stock investors may “continue to be to take profits before the end of the year,” there is “plenty of liquidity available to drive stock prices higher as dip-buyers enter the market,” strategists led by Ed Yardeni, president of Yardeni Research, wrote in a note.

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The US economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labour shortages, the Fed said in its Beige Book survey.

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Rate Hikes

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Fed Bank of Cleveland President Loretta Mester said she is “very open” to scaling back the Fed’s asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed.

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Crude Oil climbed as traders await an OPEC+ meeting that will discuss output. Elsewhere, Gold dipped and Bitcoin slipped below $57,000.

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Key events to watch this week:

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·????OPEC, allies may re-evaluate plans for reviving oil supplies, Thursday

·????US initial jobless claims, Thursday

·????US jobs report, factory orders, durable goods on Friday

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Some of the main moves in markets:

Stocks

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·????S&P 500 futures rose 0.90% as of 7.08 am in London. The S&P 500 fell 1.20%

·????Nasdaq 100 futures gained 0.70%. The Nasdaq 100 fell 1.60%

·????Japan’s Topix Index fell 0.50%

·????South Korea’s Kospi rose 1.60%

·????Australia’s S&P/ASX 200 Index shed 0.20%

·????Hong Kong’s Hang Seng Index rose 0.60%

·????China’s Shanghai Composite Index lost 0.10%

·????Euro Stoxx 50 futures fell 0.80%

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Currencies

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·????The Japanese Yen was at 113.22 per Dollar, down 0.40%

·????The offshore Yuan was at 6.3728 per Dollar

·????The Bloomberg Dollar Spot Index fell 0.10%

·????The Euro was at $1.1320

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Bonds

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·????The yield on 10-year Treasuries rose about four basis points to 1.44%

·????Australia’s 10-year yield dropped five basis points to 1.68%

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Commodities

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·????West Texas Intermediate Crude rose 1.90% to $66.84 a barrel

·????Gold was at $1,777.78 an ounce, down 0.20%

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US Market Wrap

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The S&P 500 Index slumped for a second straight day on Wednesday, in a sharp reversal from earlier gains as concerns about the Omicron variant and the Federal Reserve’s hawkish tilt overshadowed positive economic reports.?The benchmark gauge closed down by 1.2% after earlier rising as much as 1.9%. It was the worst two-day rout since October 2020, with 10 of the 11 major industry groups declining, led by losses in the consumer staples and consumer discretionary sectors. Only the utilities sector advanced. The Nasdaq 100 Index fell 1.6%, while the blue-chip Dow Jones Industrial Average slumped 1.3%.

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Wednesday was one of the most volatile trading days of the year for equities, with a ratio of the S&P 500’s high price to low price hitting its highest since March.?It’s been a turbulent week for investors, with markets grappling with uncertainty surrounding the Omicron variant as drugmakers remain split on whether current Covid-19 vaccines will provide sufficient protection and new cases were reported in Norway and Saudi Arabia. The US Centers for Disease Control and Prevention also confirmed the first US case of the new variant.

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Meanwhile, Fed Chair Jerome Powell doubled down on his comments that the Central Bank would act to keep inflation in check and told the House Financial Services Committee that the Fed should consider winding down its asset purchase programme sooner than planned.

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“The rally this morning never had a lot of conviction behind it, and investors are still trying to sort through not just Omicron but the Fed’s new reaction function too,” said Vital Knowledge founder Adam Crisafulli.

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Volatility — which had earlier eased off its recent highs — jumped to the highest level since January as the Cboe Volatility Index finished the day above the 31 level. Volatility in the Treasuries market eased some, with the ICE BofA MOVE Index extending its decline after hitting its highest level since March 2020 last week.

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Markets

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·????S&P 500 Index down 1.20%

·????Dow Jones Industrial Average down 1.30%

·????NASDAQ Composite Index down 1.80%

·????Russell 2000 Index down 2.30%

·????10 of 11 main S&P 500 sectors closed lower

·????Communication services down 2.00%

·????Consumer discretionary down 1.90%

·????US Generic Govt 10-Year down 1.60%

·????Bloomberg Dollar Spot Index (Rebased Version) down 0.40%