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- Markets in Shanghai, Tokyo, Hong Kong, and Sydney retreated at the start of the trading week.
- Spread of the Omicron variant of the coronavirus fueled fears of renewed curbs on business and travel.
- Investors are also concerned about tighter Federal Reserve policy.
Asian stock markets followed Wall Street lower on Monday amid concern about the coronavirus’s latest variant and tighter Federal Reserve policy.
Shanghai, Tokyo, Hong Kong, and Sydney retreated at the start of a trading week that ends with many closing early for Christmas.
Wall Street fell Friday as traders took money off the table after the Fed indicated it would fight inflation by speeding up the withdrawal of economic stimulus.
Meanwhile, the spread of the Omicron variant fueled fears that renewed curbs on business and travel might worsen supply chain disruptions and boost inflation.
“Omicron threatens to be the Grinch to rob Christmas,” Mizuho Bank’s Vishnu Varathan said in a report. The market “prefers safety to nasty surprises.”
The Shanghai Composite Index fell 0.8% to 3,605.21 and the Nikkei 225 in Tokyo tumbled 2.1% to 27,942.84. The Hang Seng in Hong Kong sank 1.5% to 22,837.64.
The Kospi in Seoul retreated 1.5% to 2,971.59 and Sydney’s S&P-ASX 200 lost 0.2% to 7,292.10.
India’s Sensex opened down 2.1% at 55,811.05. New Zealand gained while Singapore and Jakarta retreated.
The US government warned Sunday of a possible surge of “breakthrough infections” due to Americans traveling for the Christmas and New Year holidays.
Last week, stocks briefly rallied but then fell after Fed officials said they were willing to speed up the withdrawal of stimulus that has boosted financial markets.
Also potentially weighing on sentiment, Sen. Joe Manchin said on Sunday he wouldn’t support President Joe Biden’s $2 trillion infrastructure, social spending, and climate plan. Manchin’s announcement possibly dooms the plan’s chances in the evenly split Senate.
On Friday, Wall Street’s benchmark S&P 500 index fell 1% to 4,620.64, turning in its third losing week out of the past four. The index is 2% below its all-time high and up 23% for the year.
The Dow Jones Industrial Average fell 1.5% to 35,365.44. The Nasdaq, dominated by tech stocks, slipped 0.1% to 15,169.68.
Fed officials indicated Wednesday it might accelerate the reduction of bond purchases that inject money into financial markets and keep interest rates low. That sets the stage for the Fed to begin to raise rates next year.
Inflation has been a growing concern throughout 2021. Higher raw materials costs and supply chain problems have been raising overall costs for businesses, which have increased prices on goods to offset the impact.
Consumers have so far absorbed those price increases, but they are facing persistent pressure from rising prices and that could eventually prompt a pullback in spending. Any pullback in spending could then crimp economic growth.
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