Market Close Jan 22

Stocks fall as lockdown concerns outweigh stimulus cheer 

Bitcoin rebounds but analysts sceptical; Hong Kong restrictions rattle investors; Gold bears in hibernation 

Stocks fall as lockdown concerns outweigh stimulus cheer 
Empty shelves in Hong Kong as coronavirus sparked panic buying in the city. Photo: Reuters

(ATF) Hong Kong: Asian markets ended the week on a jittery note as restrictions to curb escalating coronavirus cases dented optimism over earnings and the mammoth US stimulus programme.

The outlook was also damped by President Joe Biden’s warning that Covid cases "are going to continue to mount” in the US and "will likely top 500,000 next month".

Hong Kong will lock down around 150 residential buildings in the Kowloon area, according to local media reports and mainland China is urging its citizens to avoid travel after Shanghai reported its first locally transmitted cases in two months.

China’s economy ended 2020 on a high note but there remains concern that consumption and manufacturing investment will slow as “the rollout of the vaccine may not offer universal coverage of the population by the end of 2021”, said Natixis Chief Economist, Asia Pacific, Alicia Garcia Herrero.

Double-dip recession

Elsewhere, clampdowns intensified, including in Germany, and the ECB warned the eurozone is heading for a double-dip recession as coronavirus lockdowns take their toll on the bloc's economy.

Japan’s Nikkei 225 index retreated 0.44%, Australia’s S&P ASX 200 dipped 0.34%, Hong Kong’s Hang Seng index tumbled 1.60% while China’s CSI300 ended flat. Regionally the MSCI Asia Pacific index slipped 0.48%.

The dollar recovered slightly trading at 90.2 versus a basket of currencies and that weighed on gold which eased 0.4% to 1,862 per ounce. With that the previous metal has failed to breach the $1,900 level for two weeks.

“Gold bears have entered a temporary state of hibernation,” said Stephen Innes, Chief Global Market Strategist at Axi. “The yellow metal seems to be past the lows for the month as the current ‘everything but the kitchen sink’ policy backdrop and FX tailwinds for precious metals remains favourable.

“Resistance lies at the 100-day moving average at $1,884. But the market needs a few more ounces of policy conviction for a break higher. Treasury yields should dictate the direction of bullion and a rally could quickly ensue if further inflation expectations.”

Treasuries firm

US Treasuries were firm with the 10-year yield dipping one basis point to 1.09%.

Bitcoin bounced back after falling below the $30,000 mark for the first time in nearly three weeks. The crypto currency was up 3% at $31,397 but analysts are sceptical about its perceived safe haven status.

“Bitcoin price movement seems to be negatively correlated with the US equity risk premium,” said Chi Lo, economist at BNP Paribas Asset Management.

“The longer the Bitcoin bubble lasts, the harder it will burst on the day of reckoning, sending shock waves to stocks and other assets. Crypto prices will eventually crash, in my view, either because of shifting monetary policy or regulations or simply because prices are inflated so much that, like in the Dutch Tulipmania, marginal buyers are priced out of the market, leading to a self-feeding process of liquidation and falling prices when leveraged punters start to sell.”

Also on Asia Times Financial

Asia Stocks

  • Japan’s Nikkei 225 index retreated 0.44%
  • Australia’s S&P ASX 200 dipped 0.34% 
  • Hong Kong’s Hang Seng index tumbled 1.60%
  • China’s CSI300 edged up 0.09%
  • The MSCI Asia Pacific index slipped 0.48%.

Stock of the Day

Telecoms gear company ZTE Corporation shares tumbled as much as 6.9% as it reported a 28% fall in profit for the year ended December 2020.