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Investors tried to gauge if the global recovery will be strong enough to resist the fast-spreading Delta Covid version on Wednesday, with most Asian markets rising. However, the slow deployment of vaccinations and a spike in infections in some countries, as well as China’s drive to tighten its hold on the world’s second-largest economy with a swathe of new restrictions for private firms, continue to question optimism.
As a result of Jerome Powell’s comments on Friday, the stock market has had a good run-up this week as the central bank eases back on its ultra-loose monetary policy and is even more hesitant about raising interest rates. Even still, Wall Street ended Tuesday’s trading session on a downbeat note as a closely watched survey showed US consumer confidence dropped sharply in August to its lowest level in six months due to concerns about Delta and soaring prices.
“A combination of higher prices – still much in evidence across a swathe of incoming US data – and doubtless too the resurgence in Delta-strain Covid-19 infections, and hospitalizations, are taking a toll,” said Ray Attrill of National Australia Bank. “How temporary this will prove to be of course remains to be seen.” Despite a successful vaccine launch in the United States, other countries that have provided fewer vaccines are dealing with new outbreaks of Covid and are being compelled to implement severe containment measures to prevent the spread of the disease. This has dampened optimism that the economic recovery that began in earnest at the beginning of the year will continue. Markets in Asia opened uneven, but recovered in the afternoon as traders appeared to ignore data showing that Chinese factory activity shrank last month. Markets in Asia opened uneven, but recovered in the afternoon as traders appeared to ignore data showing that Chinese factory activity shrank last month.
Following an official report that showed manufacturing output barely expanding and services sector activity declining, Caixin’s purchasing managers index came out on the same. In the good column were Tokyo and Hong Kong as well as Singapore, Seoul and Wellington, while Sydney, Taipei, Manila, Mumbai, Bangkok, and Jakarta declined.
US jobs statistics will be released on Friday, which could have a big impact on when the Fed decides to begin winding down its bond-buying financial support programme. As the global economy continues to improve, oil prices are projected to rise ahead of the monthly meeting of OPEC and other producers, who are expected to continue rising output. According to Bloomberg News, the American Petroleum Institute said that stocks surged by more than 2 million barrels last week, and analysts expect the market to be volatile in the coming months.
“The market is likely to remain volatile – we not only have the OPEC meeting, hurricane season is also upon us,” Howie Lee, at Oversea-Chinese Banking Corp, said. “Brent is still expected to trend within $70 to $75 for now, but the near-term volatility means it may overshoot on both ends momentarily in the coming week or two.”