Asian Shares Hit One-Week Low Due to Covid, Inflation
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Growing inflation and the bounce in COVID-19 cases have caused Asian shares to fall to the lowest in one week on Monday. Yen and gold rose high as investor appetite for risk is dwindling.
Asian Shares Dip
As reported by Reuters, “MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4% for its second straight day of losses.”
Also, Nikkei crashed 1.3% as well as the benchmark share index in Australia. “South Korea’s KOSPI was 1% lower while New Zealand's shares were off 0.4%.”
The news arrives as economic comebacks around the world are losing steam, while the aggressive Delta variant is causing mayhem in Asia, sending some countries back lockdown-related measures. Further, the rising inflation is also playing a critical role in alarming investors.
According to Reuters, economists at Bank of America “have downgraded their forecasts for U.S. economic growth to 6.5% this year, from 7% previously, but maintained their 5.5% forecast for next year.”
As the proprietary inflation remains high in the U.S., experts maintain that the trend is bound to stay at a high for the following months.
CNBC reports that the selling in futures “increased as the morning progressed with Dow Jones Industrial average futures now down about 500 points.”
However, they say, “The good news is... we are likely near the peak, at least for the next few months, as base effects are less favorable and shortage pressures rotate away from goods towards services.”
Global Shares Outlook
According to MSCI’s all-country world index, “a gauge of global shares scaled a record peak last week but finished it 0.6% lower.” The Dow, the S&P 500, and Nasdaq dipped 0.9%, 0.75%, and 0.8% respectively.
On the week of July 19, as their June quarter earnings report is set to be disclosed, all investors’ eyes are on the performance of giant firms like Netflix Inc (NASDAQ:NFLX), Philip Morris International Inc (NYSE:PM), Coca-Cola CO (NYSE:KO), and Intel Corporation (NASDAQ:INTC).
The 11% earnings beat estimated by analysts at Bank of America is set to rekindle investors’ confidence in the economic comeback, and will “drive a rotation back into so-called ‘value’ stocks, which currently trade below what they are actually worth.”
Perceived safe haven assets like gold edged up to spot prices at $1,815.4 an ounce, while oil reported some losses as Brent crude dipped 55 cents to $73.04 a barrel, and U.S. crude fell 41 cents to $71.40 a barrel.
David Jones, Chief Market Strategist at European investment trading platform Capital.com, had asserted earlier in July: “These worries don’t look big enough just yet to spook markets and cause a more sustainable sell-off. After a few hours of trading, stocks in the USA were attracting buyers once.”