SYDNEY, RAW – Asian shares have slipped again while perceived safe haven assets, including the yen and gold, edged higher as investor risk appetite was soured by fears of rising inflation and a relentless surge in coronavirus cases.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent on Monday for its second straight day of losses.
Japan’s Nikkei dropped 1.3 per cent as did Australia’s benchmark share index. South Korea’s KOSPI was one per cent lower while New Zealand’s shares were off 0.4 per cent.
Global economic growth is beginning to show signs of fatigue while many countries, particularly in Asia, are struggling to curb the highly contagious Delta variant of the coronavirus and have been forced into some form of lockdown.
The spectre of elevated inflation, which the market has long feared, is also haunting investors.
Economists at Bank of America have downgraded their forecasts for US economic growth to 6.5 per cent this year, from seven per cent previously, but maintained their 5.5 per cent forecast for next year.
“As for inflation, the bad news is it’s likely to remain elevated near term,” they say in a note.
“The good news is … we are likely near the peak, at least for the next few months, as base effects are less favourable and shortage pressures rotate away from goods towards services.”
US Federal Reserve chair Jerome Powell has repeatedly said any inflation flare-up is expected to be transitory, indicating monetary policy will remain supportive for some while yet.
Yet markets are unconvinced. Aviva Investors, the global asset management business of Aviva, expects rapid growth and inflation to put some upward pressure on long-term sovereign bond yields.
Action in the currency market was muted on Monday.
The US dollar was barely changed against a basket of major currencies at 92.640.
Against the safe haven yen, the dollar was down 0.2 per cent at 109.86, edging closer to the recent one-month trough of 109.52.
The euro was mostly flat at $US1.1811.
The risk-sensitive Aussie slipped to $US0.7392, the lowest since last December during early Asian trading.
Equity performance in recent days underscored investor nerves.
For example, MSCI’s all-country world index, a gauge of global shares scaled a record peak last week but finished it 0.6 per cent lower. The Dow closed down 0.9 per cent, the S&P 500 slipped 0.75 per cent, and the Nasdaq lost 0.8 per cent.
These losses came despite stronger-than-forecast US retail sales last week, which rose 0.6 per cent in June, contrary to an expected decline.
Next on investors’ radar is June quarter corporate earnings with Netflix, Philip Morris, Coca Cola and Intel Corp among companies expected to report this week.
Elsewhere, gold, a perceived safe haven asset, inched up with spot prices at $US1,815.4 an ounce.
Oil extended losses, with Brent crude down 55 cents to $US73.04 a barrel. US crude slipped 41 cents to $US71.40 a barrel.