Asian markets take a step back from record highs on Biden’s stimulus proposal

SYDNEY (Reuters) – Asian equities slipped from all-time highs on Friday as investors took profits after a recent rally driven by hopes of US economic stimulus from newly inaugurated President Joe Biden.

Sentiment was also influenced by concerns about new coronavirus restrictions in China which reported 103 cases of COVID-19 on Friday.

Futures indicated a gloomy start for the European and US equity markets. Futures on the Eurostoxx 50 fell 0.4%, while futures for the German Dax index fell 0.3% and those for the London FTSE fell 0.2%. E-Mini futures for the S&P 500 stumbled 0.25%.

MSCI’s broader index of Asia Pacific equities outside of Japan extended losses in afternoon trading up to 0.6% to 720.17 points after three consecutive earnings sessions.

The index has grown a stellar 8.8% in January so far, after hitting an all-time high of 727.31 on Thursday.

Analysts expect Friday’s losses to be short-lived as they predict a strong resumption of global growth supported by record low interest rates around the world.

“2021 begins with expectations of reopening in the second half as the key macro theme and consensus forecast project a V-shaped recovery in global growth and corporate earnings,” Paul O’Connor, head of the multi UK-based asset of Janus Henderson.

“While many countries and sectors will bear the scars of the COVID-19 shock for years to come, 2021 is expected to see some decisive steps along the road to recovery as restrictions on economic activity ease as the economy progresses. ‘year, unlocking pent-up consumer spending, ”O’Connor added.

The MSCI Asia ex-Japan index has so far climbed 3.7% this week, reflecting relief from an orderly transition of power in the US and strong expectations that US stimulus will provide continued support for global assets.

Republicans in the US Congress have indicated they are willing to work with President Joe Biden on his administration’s top priority, a $ 1.9 trillion US fiscal stimulus plan, although some are against the price.

Democrats took control of the US Senate on Wednesday, though they will still need Republican support to pass the program.

The Australian benchmark index fell 0.3% while the Japanese Nikkei fell 0.4%.

Chinese equities started in trouble with the blue chip CSI300 index down 0.3% and Hong Kong’s Hang Seng down 1.4%.

Travel plans were in limbo for tens of millions of people in northern cities of China who were stuck in some kind of lockdown amid concerns that undetected coronavirus infections could spread quickly during the Lunar New Year holiday, just weeks away of distance.

Overnight on Wall Street, both the S&P 500 and the Nasdaq Composite closed at all-time highs. [.N]

In the currency markets, the US dollar stalled after three consecutive days of losses, although it is still down 0.7% this week.

Against the Japanese yen, the dollar has fallen 0.28% so far this week.

The commodity-sensitive Australian dollar was up 0.6% this week while the euro was up 0.8% over the period.

The recent decline in the greenback was led by investors investing in high-yielding currencies, optimistic about a rapid economic recovery driven by massive US stimulus.

The popular bitcoin cryptocurrency fell to a nearly three-week low on Friday due to profit taking and concerns over additional regulations.

It is on track to its worst weekly performance since the beginning of 2020, down 12.3% so far.

In commodities, oil prices have been weighed down by concerns that new pandemic restrictions in China will reduce fuel demand in the world’s largest oil importer. [O/R]

Brent and US crude were 73 cents lower at $ 55.37 and $ 52.40 a barrel, respectively.

Spot gold fell 0.6% to 1,859.4 per ounce.

Reportage by Swati Pandey in Sydney and Jessica DiNapoli in New York; Editing by Shri Navaratnam and Simon Cameron-Moore