As Asian stocks fall as Omicron spreads, the Fed makes a decision on Reuters

Author: Paulina Duran

SYDNEY (Reuters) – Asian stocks fell sharply and oil prices fell on Tuesday as the spread of the Omicron coronavirus variant shook investors ahead of a number of central bank decisions this week, including a key Federal Reserve meeting.

The broader MSCI index of Asia-Pacific equities outside Japan fell 0.77% as the Asian Development Bank (ADB) cut its growth forecast for Asian development, reflecting the risks posed by new variants of the virus.

China’s CSI300 index was down 0.39% after Tianjin health authorities detected the country’s first Omicron case, while Britain reported the first death of the variant.

In Hong Kong, it fell by 1.2%, while concerns about the health of China’s property sector also declined.

Combinations of the economic risks of the Omicron variant and the more potential tone of the Fed on Wednesday dampened risk appetite in Asia.

However, equities in the northern hemisphere could breathe, with E-mini futures rising 0.13% and futures 0.29% higher, indicating a potential positive start for European markets.

“I think there are reasons why you can expect to get some cash back, as they believe the start of 2022 will be a volatile period,” said John Milroy, an adviser to Ord Minnett in Sydney. “We believe that challenges such as China’s slowdown and uncertainty over monetary policy will have an impact on earnings and valuation multiples.”

Zhejiang, China’s main manufacturing province, is battling COVID-19 clusters this year, with tens of thousands of citizens disrupting business operations in quarantine and virus-affected areas.

ADB forecast that China’s economy will grow by 8.0% this year, slightly weaker than the 8.1% estimate made in September, before slowing to 5.3% in 2022, below the 5.5% forecast.

South Korea was down 0.63%, the stock index fell 0.86% and Australian stocks were down slightly.

The MSCI worldwide stock gauge was 0.13% lower.

On Wednesday, the Fed is expected to cut its $ 120 billion-a-month bond purchase program faster to deal with the high inflation rate, which could bring it even one step closer to raising interest rates.

As the dollar climbed ahead of upcoming meetings, investors saw an opportunity to start raising interest rates in the Fed in 2022.

“In all decisions of the Fed, the ECB and the BOE (volatility) will be higher,” said Edward Moya, senior analyst at OANDA.

The European Central Bank, the Bank of England and the Bank of Japan are also holding a meeting this week, and each is on track to normalize its monetary policy.

Fears over the Omicron variant of COVID-19 were heightened after British Prime Minister Boris Johnson announced a “wave” of new cases, and the World Health Organization said the risk was “very high” with some evidence leaking. vaccine protection.

The future of oil was dampened as new doubts arose about the effectiveness of vaccines against the Omicron coronavirus variant, although OPEC announced in its monthly report that the effect would have a slight effect on fuel demand.

futures were 22 cents, or 0.28% lower, at $ 74.18 a barrel, while US West Texas Intermediate (WTI) gross was 30 cents or 0.38% lower at $ 71.02.

Profits extended on Tuesday rose 0.07%, while the euro fell 0.07% to $ 1.1275, which was weak given expectations that the Fed will tighten policy faster than the ECB.

The benchmark changed slightly after falling 1.422% on Monday as traders settled in a hawkish Fed. [US/]