SINGAPORE (Reuters) – Asian stocks fell on Tuesday, retreating from record levels, as lingering concerns about possible obstacles to the Biden government’s $ 1.9 trillion stimulus weighed on mood, pulling Treasury yields from the USA to three-week lows.
The lower risk appetite gave the dollar some support against a basket of currencies, while oil prices fell.
EUROSTOXX 50 futures declined 0.1%, while FTSE futures increased 0.03%, indicating a mixed opening to European equity markets. E-Mini futures for the S&P 500 ESc1 fell 0.5%.
In a sea of red seen in all markets, South Korea and Hong Kong overcame the losers and fell more than 2% each, Japan fell 0.9% and Chinese shares fell 1.6%. All reached historical records earlier this month.
“We heard some warning bells in different parts of the world as we saw more blockages in Europe, the US and Asia,” said Vasu Menon, senior investment strategist at OCBC Bank Wealth Management.
MSCI’s broader Asia-Pacific stock index outside Japan fell 1.5% to 717.3, but it was not far from the record set on Monday and is still up 8% this year. The index was on track to record its biggest drop since late November.
“You need to see the delivery of sufficient economic data, earnings and vaccine delivery,” said Menon, adding that uncertainty about the timing of the US stimulus package was hurting market sentiment.
Latent tensions in the Taiwan Strait and the South China Sea have also increased the reasons for caution in Chinese markets, where a jump in small cap caps has also caught the attention of regulators.
A flood of money supply, ultra-low or zero interest rates and the launch of COVID-19 vaccines have triggered a “buy it all” rally in recent months.
Some investors – pointing to skyrocketing asset prices like bitcoin or, on Monday, rising share prices for the small video game retailer Gamestop – are beginning to fear that markets are entering bubble territory.
US lawmakers agreed that providing COVID-19 vaccines to Americans should be a priority, even when they oppose the size of a pandemic aid package.
Disagreements meant months of indecision in a country that suffers more than 175,000 cases of COVID-19 a day, with millions of unemployed.
On Monday, the Nasdaq index reached a new peak, but the Dow Jones Industrial Average fell. [.N]
“We suspect that profits may not be able to achieve what people expect this year,” said Jacob Doo, chief investment officer at Envysion Wealth Management, citing the blockages in Europe and the slow distribution of vaccines in the United States.
“In the technology space, we are cautious about FANGS now, simply because there could be antitrust laws that Biden would implement,” said Doo.
The focus will also shift to the Federal Reserve’s Open Market Committee meeting on Tuesday and Wednesday.
“We expect the January FOMC to repeat and reinforce the Fed’s existing dovishness, which is still significant, given recent central bank reduction discussions and other considerations to adapt the policy,” said Ebrahim Rahbari, foreign exchange strategist at CitiFX, in a report.
The dollar advanced to almost a week high against a basket of currencies, with stock volatility undermining investors’ appetite for riskier currencies. The euro fell to $ 1.2127. [USD/]
The US Treasury’s 10-year benchmark yields fell a fraction, returning to Monday’s three-week low, last traded at 1.0381%. [US/]
Brent crude fell 0.7% to $ 55.50 a barrel, up almost 1% on Monday. [O/R]
Reporting by Anshuman Daga; edition of Shri Navaratnam and Richard Pullin