HONG KONG, There were mixed results in Asian markets on Tuesday after the previous day’s rout, but investors were still worried about the effects of Covid and the Federal Reserve’s plan to raise interest rates quickly, which is bad for the mood.
Thousands of people in China’s biggest cities have been cut off because of the Omicron outbreak. This could hurt the world’s second-largest economy in a big way.
Shanghai, China’s largest city, has been under lockdown for weeks, but Beijing has started testing almost all of its 21 million people. Many people in the capital now fear that they, too, will be shut down like Shanghai.
The measures have taken a big bite out of the economy, which has led to fears about what will happen to the rest of the world because it buys so many things from China.
A hawkish Fed is having trouble controlling inflation, which is at a more than 40-year high. The China crisis comes as traders deal with this.
A BMO Capital Markets analyst says that for the time being, “the spectre of more severe restrictions in China is not being traded from the inflationary side.” Instead, it is being seen as a setback to the global recovery and as a shock to the world’s demand.
They also said that they were “less sure” that the situation will change the Fed’s plans to raise interest rates quickly to stop inflation from getting out of hand.
They want to raise interest rates several times this year in an effort to keep prices down, with the head of the US central bank, Jerome Powell, predicting a half-point rise next month and more before the end of 2016.
When there is a war in Ukraine, it adds to the Fed and China problems. Investors are nervously waiting for big company results and predictions, hoping to get a sense of how these events will affect their bottom lines.
With the news that Elon Musk bought Twitter for $44 billion, Wall Street ended the day on a positive note. Asia had a rough day.
But the Asian market was still weak on Tuesday.
Hong Kong and Shanghai made small gains, but they didn’t make much of a dent in the huge losses they had the day before.
In addition, Tokyo, Seoul, and Jakarta went up a little bit. Sydney, Singapore; Wellington; Taipei; and Manila all went down a little.
Crude prices were a little higher, but they couldn’t get back to where they were before Monday’s big drop because of fears about China.
People thought that lockdowns would ease up before the “Golden Week” holiday next week because of Omicron’s less lethal footprint. Stephen Innes at SPI Asset Management says that.
This was not going to happen, so traders were then forced to lower the value of oil prices because there was going to be a longer slump in consumption than expected.