Asian slips away from record highs

Sydney — Asian shares drifted off record on Thursday as widening Covid-19 restrictions in the US weighed on Wall Street, while bonds were underpinned by speculation the Federal Reserve would have to respond with yet more easing.

Japan also reported record news cases as Tokyo raised its pandemic alert to the highest level, shoving the Nikkei down 0.8% and away from a 29-year closing top.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%, off their historic high. Chinese blue chips added 0.4% as President Xi Jinping vowed to cut tariffs and expand imports of high-quality goods and services.

E-mini futures for the S&P 500 steadied after Wall Street took a late dip on Wednesday. The Dow ended down 1.16%, while the S&P 500 lost 1.16% and the Nasdaq 0.82%.

Pfizer shares had gained after the drugmaker said its Covid-19 vaccine was 95% effective and it would apply for emergency US authorisation within days.

Pfizer’s announcement came on the heels of a similar report from Moderna.

Yet, the US death toll still neared a world record of a quarter million as government officials in dozens of states weighed or implemented shutdown measures.

New York closed its schools on Wednesday, while Minnesota ordered bars and restaurants to cease in-door dining.

“The vaccine news is a positive medium-term impulse for the global economic outlook and investors are trying to weigh that against the prospect of an imminent stalling of the European and US recovery amid the prospect of extensions of current lockdown measures,” said Rodrigo Catril, a senior forex strategist at NAB.

Forcing the Fed

The drag from new US restrictions was only amplified by the total lack of progress on a fiscal stimulus bill, fuelling speculation the Federal Reserve would have to expand its asset-buying campaign at a December policy meeting.

Two top Fed officials on Wednesday held out the option of doing more.

The chance of further easing has helped nudge 10-year treasury yields down to 0.85% and away from an eight-month top of 0.975% touched last week.

It has also weighed on the dollar, which slipped for five sessions in a row before steadying a little on Thursday. Against a basket of currencies it was last at 92.477, still close to recent lows of 92.129.

The dollar has likewise been in a slow decline against the Japanese yen to reach ¥103.72 and was approaching the recent eight-month trough at ¥103.16.

The euro has had pandemic problems of its own as lockdowns spread across the continent, keeping it capped at $1.1844 and short of the recent peak of $1.1919.

Sterling dipped to $1.3230 as Brexit talks dragged on. The Times reported Europe’s leaders would demand the European Commission publish no-deal plans as the deadline neared.

Bitcoin, sometimes regarded as a safe haven or at least a hedge against inflation, rose to more than $18,000 for the first time in nearly three years. It last stood at $17,808.

All the talk of policy easing put a floor under gold prices, leaving the metal steady at $1,868/oz.

Oil prices eased as virus restrictions hit fuel demand across Europe and the US.

US crude fell 35c to $41.47 a barrel, while Brent crude futures lost 23c to $44.11.

Reuters