Asian shares slip in cautious trading, shrug off US rally

Worries remain in Asia about ongoing coronavirus infections, although hopes are growing that economic activity will return closer to normal later this year

Tokyo: Asian shares slipped in cautious trading Wednesday, shrugging off a rally on Wall Street led by technology companies and banks that erased most of the losses from the previous day’s sell-off.

Japan’s benchmark Nikkei 225 sank 1.3 per cent in afternoon trading to 27,470.09. South Korea’s Kospi dipped 1.4 per cent to 2,919.87. Australia’s S&P/ASX 200 shed 0.6 per cent to 7,206.50. Hong Kong’s Hang Seng was little changed inching down less than 0.1 per cent to 24,093.07. Trading was closed in Shanghai for the Chinese national holidays.

Worries remain in Asia about ongoing coronavirus infections, although hopes are growing that economic activity will return closer to normal later this year, bouncing back from the deep downturn in 2020.

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On the risks front, China credit problems and contagion risks have certainty not abated with developer concerns still surfacing. As such, caution has not been thrown to the winds, said Tan Boon Heng of the Asia & Oceania Treasury Department at Mizuho Bank in Singapore.

Troubled real estate developer China Evergrande Group’s risk of defaulting on its more than USD 300 billion in debt has alarmed investors already worried over the slowdown in China’s growth.

Shares skidded in Japan after Prime Minister Fumio Kishida took office on Monday. Kishida has indicated he might favour a capital gains tax to improve government finances.

Prospects for the world’s third largest economy remain uncertain. Fitch agency has retained a negative outlook for Japan, citing downside risks to the macroeconomic and fiscal outlook from the coronavirus shock.

Shares fell in New Zealand after its central bank raised interest rates for the first time in more than seven years, removing some of the support it put in place when the coronavirus pandemic began.

The Reserve Bank raised the benchmark rate from a record low 0.25 per cent to 0.5 per cent. The move came despite a lockdown in Auckland due to a coronavirus outbreak.

The bank said inflation was expected to rise to 4% in the short term before easing to 2 per cent in the medium term.

On Wall Street, the S&P 500 rose 1.1 per cent to 4,345.72. The Dow Jones Industrial Average added 0.9 per cent to 34,314.67, and the Nasdaq gained 1.3 per cent to 14,433.83. Small company stocks also notched gains. The Russell 2000 index picked up 0.5 per cent to 2,228.36.

The gains marked a reversal in the market’s overall trajectory in recent weeks. The S&P 500 fell 4.8 per cent in September, its first monthly drop since January. After steadily losing ground since it set an all-time high Sept. 2, the index slipped Tuesday below its 100-day moving average of 4,354.

The market has been choppy for weeks, with inflation concerns driving up-and-down shifts for technology companies and the broader market.

Rising inflation is prompting businesses from Nike to Sherwin-Williams to temper sales forecasts and warn investors that higher costs will hurt financial results. Supply chain disruptions and delays, along with rising raw materials costs, are among some of the key problems facing companies as they try to continue recovering from the pandemic’s impact.

The lingering pandemic and global supply chain problems prompted the International Monetary Fund to trim its forecast for global growth this year.

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