Asian and European markets suffered more losses yesterday, capping a painful week for global equities that has been characterised by fears over surging infections and stuttering vaccine rollouts.
Traders have been licking their wounds after the worst global rout since October, following a months-long rally that has seen several indexes strike record or multi-year highs.
But observers remain confident for the long-term prospects of prices as the planet emerges from lockdowns and more people get inoculations.
Wall Street and most of Europe provided a positive lead, helped by some much-needed good news that fewer Americans than expected made claims for jobless benefits last week.
And data showing the US economy suffered its worst year since 1946 – while growth tapered in the fourth quarter – also gave support to calls for lawmakers to pass Joe Biden’s huge stimulus proposals.
Tokyo shed close to 2%, while Seoul and Manila plunged more than 3% and Jakarta more than 2%, with Taipei off 1.8%.
Hong Kong, Shanghai, Sydney, Singapore and Bangkok also suffered sizeable falls. Mumbai and Wellington both rose.
Tokyo’s Nikkei 225 closed 1.9% down at 27,663.39 points, Hong Kong’s Hang Seng ended 0.9% down at 28,283.71 points and Shanghai’s Composite finished 0.6% down at 3,483.07 points.
London, Paris and Frankfurt all tumbled more than 1% at the open. Several issues have combined to push markets down, including concerns that valuations had gone too far as well as the frightening spike in virus cases and new variants, along with stuttering vaccination campaigns around the world.
Markets have also been rattled by a David-and-Goliath battle between a growing number of chatroom-inspired retail traders and Wall Street investors centred on struggling video game retailer GameStop, which has seen a number of professional dealers lose billions of dollars.
“The mood has become quite gloomy on vaccinations, which may not be surprising given we are in the pandemic’s darkest time so far,” said Axi strategist Stephen Innes. “But I think it’s important not to lose sight of what matters from a medical perspective: the vaccines work.”
He added: “The big picture does not change in terms of markets’ outlook.
Namely, an unprecedented amount of monetary and fiscal stimulus, a structural shift towards much more spending, a potentially unmatched economic rebound – whether starting in the second or third quarter – and a reasonable chance of inflation for the first time in several decades.”
National Australia Bank’s Tapas Strickland was also upbeat on the long term, writing in a note: “While there remains delays in the vaccine rollout (the EU is threatening to tighten rules on the export of vaccines), the efficacy of the vaccine remains and still allows risk markets to price the other side of the pandemic.”
“The GameStop saga will end, leaving a sour taste in policymakers’ mouths,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The story could be a trigger for action that could bring the government and the central bank to revise their ultra-loose policies that throw liquidity in the middle, and not towards a reasonable target.”
Covid-19 vaccine production delays have snowballed into a spat between Britain, the European Union and drug makers over how best to direct limited supplies.
Europe’s fight to secure vaccines intensified on Thursday when the EU warned drug companies that it would use all legal means or even block exports unless they agreed to deliver shots as promised.
Britain’s former vaccine chief Kate Bingham said yesterday she did not believe the EU would block exports.
New variants of the novel coronavirus have also prolonged lockdowns and delayed expectations of an economic rebound.
“The pandemic continues to cast a dark shadow and the timing of any recovery, economic or social, remains unclear,” said Richard Hunter, head of markets at Interactive Investor.
The US dollar rose to a seven-week high against the yen, and gained 0.2% against an index of currencies, bringing its weekly rise to 0.6%. The euro fell 0.12% and the pound dropped 0.3%. German 10-year government bond yields ticked up one basis point. Brent crude futures were up 0.1% at $55.58 a barrel and US crude futures slipped 0.27% to $52.20 a barrel.