As Global Stocks Hit New ATH, Nikkei Index Falls
ZFX - Global stocks stalled at two-week highs on Thursday as increased restrictions in some parts of the world to contain the Omicron coronavirus variant dampened optimism following the encouraging news on the vaccine front.
European stock markets opened higher, but far from Wednesday's highs, US stock futures were mixed and Japan's blue-chip Nikkei stock index slipped nearly half a percent.
That left the MSCI world stock index hovering near two-week highs but struggling to make much headway after three straight days of gains.
News on Wednesday from drug-makers Pfizer (NYSE:PFE) and BioNTech that a three-shot course of their COVID-19 vaccine was shown to produce a neutralizing effect against the Omicron variant in laboratory tests has cheered investors and lifted the S&P 500 within 1% of a new record high.
However a note of caution is also being set across the world markets as governments take new measures to contain the spread of the new variant.
Late Wednesday, British Prime Minister Boris Johnson imposed tougher COVID-19 restrictions in the UK.
"With Omicron, we still don't know the efficacy of the vaccine and the spread and nature of this variant," said Guy Miller, chief market strategist at Zurich Insurance Group (OTC:ZFSVF).
"In the near term, calling out where the market is going is a challenge. Longer term, we still have a lot of drivers supporting equities," he said, adding that he expects a strong macroeconomic environment next year that will support corporate earnings.
As risk appetite faltered, risk-sensitive currencies and oil prices also lost ground.
After surging 2.6% in three days, the growth-sensitive Australian dollar was flat at $0.7165.
Oil prices fell as European trade progressed. Brent crude futures fell 0.25% to $75.64 a barrel, US crude fell 0.11% to $72.29.
Hopes for monetary easing after this week's cuts to banks' reserve ratios and moderately tame inflation figures on Thursday lifted Chinese shares and Asian shares outside Japan, which rose 0.6% to a two-week peak.
The blue chip CSI300 index was last up nearly 2% and has gained nearly 4% for the week so far. If held, it would mark the biggest weekly jump since February.
INFLATION LYING IN WAIT
Bonds suffered losses as hopes on the outlook for the virus left a clearer path to higher levels. Traders' focus turned to the release of US inflation data on Friday and the Federal Reserve meeting next week for indications of timing of gains.
Fed funds futures are priced in for a rate hike next May and on Wednesday the two-year Treasury yield touched its highest level since March 2020 at 0.7140%.
They were steady around 0.68% on Thursday and the 10-year yield held at 1.50% after a 4.6 basis point surge on Wednesday.
Economists had expected headline annual US inflation to have hit 6.8% last month, although earlier readings surprised on the plus side.
"The acceleration in the pace of tapering by the Fed is almost seen as a foregone conclusion," said analysts at ANZ Bank, and beyond that loomed expectations of higher US interest rates in 2022.
“But a strong number could increase expectations of a hike in Q2 next year.”
In Europe, European Central Bank policymakers are following a temporary increase in their regular bond-buying scheme that will still significantly reduce overall debt buying after the pandemic-fighting scheme ends in March, sources told Reuters.
Elsewhere, the US dollar index was hovering at 96.058 and the euro was down slightly to $1.1320.
The greenback was a fifth of a percent weaker at 113.46 yen, while sterling eased from a one-year low Wednesday of $1.31615 overnight with the announcement of stricter COVID-19 rules.
Gold is steady at $1,782 and ounce and bitcoin appear to have found support around $50,000.
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