Investors started the week on a broadly positive note on Monday but uncertainty remained ahead of an expected series of interest rate hikes by the Federal Reserve, while data showed growth in China’s economy slowed at the end of last year.
While the fast-spreading Omicron coronavirus variant continues to cast a shadow across trading floors, the focus is on the US central bank’s plans to tighten monetary policy to fight surging inflation. Fed officials were out in force last week flagging the merits of raising borrowing costs as soon as March, though boss Jerome Powell said they would be careful to ensure they do not knock the recovery in the world’s top economy off course.
Still, expectations that the era of cheap cash that has helped power markets to record or multi-year highs, has weighed heavily for months, while data showing consumer prices rocketing at a pace not seen in four decades has added to the downbeat mood.
A weak reading on retail sales for December caused by concern about the latest COVID wave and higher prices was compounded by a University of Michigan survey showing consumer sentiment fell sharply in January. That saw Wall Street turn in a tepid performance on Friday, with disappointing bank earnings also dragging sentiment.
A weak reading on [US] retail sales for December caused by concern about the latest COVID wave and higher prices was compounded by a University of Michigan survey showing consumer sentiment fell sharply in January
Despite the uncertain start to 2022 for global markets, Eli Lee at Bank of Singapore remained upbeat about the outlook.“As we head into 2022, we believe that the post-pandemic bull market remains broadly intact,” he said in a commentary. “Historically, bull markets do not end at the beginning of rate hike cycles, and positive trends in global economic growth and earnings continue to be positive fundamental drivers for the market.”
Asia mostly rose, with Tokyo, Shanghai, Sydney, Singapore, Wellington, Taipei, Mumbai and Bangkok up but Hong Kong, Seoul, Manila and Jakarta were down.London, Paris and Frankfurt all rose at the open.
Macau casino stocks rally
Mainland Chinese shares were given some support by news that the central bank had cut interest rates for the first time since the height of the pandemic last year as officials look to kickstart stuttering growth.
Data showed on Monday that the world’s number-two economy expanded 8.1 per cent last year – its best rate in 10 years – but slowed in the final three months as it was hit by virus lockdowns around the country and weakness in the crucial property sector. Much of the annual growth came in the first half of the year, with the economy rocked by a series of shocks towards the end of 2021.
“The (Chinese central bank) really has started the New Year in a different position to, let’s say, other global banks and we do expect to see further easing or supportive measures, both monetary-wise as well as from a fiscal stance,” Catherine Yeung of Fidelity International told Bloomberg Television.
Hong Kong-listed casino stocks rocketed after Macau officials on Friday unveiled regulatory measures for the sector that were not as bad as initially feared. Under the proposed bill, the number of gaming concessions will remain at six but their term will be halved to 10 years, while the proportion of local ownership in casino firms will be lifted from 10 per cent to 15 per cent.
The revisions should “remove most investors’ key concerns, (for example on) dividends, government oversight, minimum shareholding by a Macau permanent resident, gaming tax, etcetera”, Citigroup analysts including George Choi said in a note.
Sands Macau soared more than 14 per cent, Wynn Macau and MGM China nearly 12 per cent each, while Melco was up five per cent. That followed strong gains in New York, where Las Vegas Sands and Melco rocketed more than 14 per cent.