Asian stock markets traded mixed on Monday as investors weighed the impact of the US Federal Reserve’s hawkish stance on monetary policy and the spread of the Delta variant of the coronavirus. Wall Street closed lower on Friday, snapping a two-week winning streak for the S&P 500 and the Nasdaq. Indian stocks opened weak on Monday, tracking global cues and amid concerns over rising inflation and Covid-19 cases.
Fed’s Tapering Plans Spook Investors
The US Federal Reserve signalled last week that it may start tapering its bond-buying program as soon as November and raise interest rates next year, sooner than previously expected. The Fed’s move reflects its confidence in the economic recovery and its concern about inflation, which has been running above its 2% target for several months.
The Fed’s announcement rattled investors, who fear that tighter monetary policy could dampen growth and corporate profits. The S&P 500 fell 0.9% on Friday, while the Nasdaq dropped 0.9% and the Dow Jones Industrial Average slid 1.4%. For the week, the S&P 500 and the Nasdaq lost 0.1% each, while the Dow shed 0.5%.
Delta Variant Weighs on Global Recovery
The Delta variant of the coronavirus continues to pose a threat to the global recovery, as it spreads rapidly in many countries and regions. The World Health Organization (WHO) warned last week that Covid-19 deaths could rise again in Europe by December, unless more people get vaccinated and adhere to social distancing measures.
The Delta variant has also hampered China’s economic activity, as authorities imposed strict lockdowns and travel restrictions in some areas to contain outbreaks. China’s official manufacturing Purchasing Managers’ Index (PMI) fell to 49.6 in August, below the 50-mark that separates expansion from contraction, indicating a slowdown in factory output.
Indian Stocks Open Lower Amid Inflation and Covid-19 Worries
Indian stocks opened lower on Monday, following global markets and amid domestic challenges. The benchmark BSE Sensex was down 0.7% at 58,787.51 points, while the broader NSE Nifty was down 0.8% at 17,509.05 points, as of 10:15 a.m. local time.
Investors are worried about rising inflation in India, which could limit the scope for further monetary easing by the Reserve Bank of India (RBI). India’s retail inflation eased to 5.3% in August, but remained above the RBI’s tolerance band of 2-6%. India’s wholesale inflation also moderated to 11.4% in August, but stayed at elevated levels.
Meanwhile, India reported 26,041 new Covid-19 cases and 276 deaths on Monday, taking the total tally to 33.6 million cases and 446,918 deaths. India is facing a potential third wave of infections, as some states have eased curbs and festive season demand has increased mobility and social gatherings.
Asian Markets Show Mixed Performance
Asian markets showed a mixed performance on Monday, as investors digested the Fed’s tapering plans and the Delta variant risks. Japan’s Nikkei 225 rose 0.2% to close at 30,447.37 points, boosted by hopes of fiscal stimulus after Prime Minister Yoshihide Suga announced his resignation last week.
China’s Shanghai Composite gained 0.5% to end at 3,621.86 points, recovering from a sharp drop on Friday triggered by a crackdown on cryptocurrency trading and mining by Chinese regulators. Hong Kong’s Hang Seng fell 1.5% to finish at 24,192.16 points, dragged by tech stocks that were hit by Beijing’s tightening grip on the sector.
South Korea’s Kospi slipped 0.3% to close at 3,127.86 points, as investors remained cautious ahead of a holiday-shortened week and a possible missile test by North Korea. Australia’s S&P/ASX 200 edged up 0.1% to end at 7,384 points, supported by mining and energy stocks that benefited from higher commodity prices.