Markets mixed as traders prepare for big week

HONG KONG (AFP) – Equity markets were mixed yesterday following last week’s rally as investors prepare for a big week that could see the vaccine rollout begin in earnest and United States (US) lawmakers agree a new stimulus, while post-Brexit trade talks remain on a knife-edge.

But while the general consensus is for a strong recovery in 2021 as billions are inoculated, the surge in virus cases around the world and ongoing China-US tensions continue to keep a lid on sentiment.

Regional traders struggled to build on last week’s advances, despite all three Wall Street indexes chalking up records on Friday thanks to signs of movement in US stimulus talks and hopes for the vaccine.

Optimism US lawmakers will agree a rescue package was boosted on Friday with data showing the world’s top economy created far fewer jobs than forecast in November as the country is battered by a jump in infections that is forcing leaders to impose containment measures.

Senate Republican Leader Mitch McConnell and Democratic House Speaker Nancy Pelosi have revived efforts to hash out a deal for more aid, with both recognising the need for help for Americans as the festive season approaches.

Senators and their teams worked all weekend on a detailed bill, which “will probably come out early this week”, Republican senator Bill Cassidy told Fox News Sunday.

Pelosi has agreed to make the proposal the basis for negotiations on a final text.

A currency trader passes by screens showing the Korea Composite Stock Price Index and foreign exchange rate in Seoul. PHOTO: AP

Traders are also keeping tabs on the deployment of vaccines around the world, with Britain in line to start giving jabs this week, while US approval of its first drug could come as soon as Friday. Belgium, France and Spain have said jabs will begin in January for the most vulnerable.

The expected vaccine rollout is “continuing to help share markets look through the current problems with the virus and its economic impact”, said Shane Oliver at AMP Capital Investors.

The World Health Organization (WHO) said 51 candidate vaccines are currently being tested on humans, with 13 reaching final-stage mass testing.

Stephen Innes of Axi said with the vaccine rally largely priced into stock prices, gains would now likely be driven by “the pace of vaccinations versus the COVID resurgence speed, similar to how shifts in mobility drove equities through the spring and summer”.

“As the market takes out new highs, investors sitting on the fence may be forced to react, not wanting to miss out on the pot of gold that lies at the other end of the vaccine reopening rainbow”.

Still, markets struggled to push ahead in Asia yesterday.

Hong Kong fell more than one per cent and Shanghai sank 0.8 per cent, with traders unmoved by data showing Chinese exports expanded in November at their fastest pace in almost three years. Tokyo slipped 0.8 per cent.

But there were gains in Seoul, Sydney, Mumbai, Singapore, Manila, Jakarta and Wellington.
Sentiment was given a jolt by reports that the US is considering fresh sanctions on several Chinese officials over their roles in the disqualification of lawmakers in Hong Kong, as US President Donald Trump presses ahead with his fight against Beijing before leaving office.

Sterling sank against the dollar and euro as Britain and the European Union (EU) continue with talks on a trade deal for when Britain leaves the customs union on December 31.

EU lead negotiator Michel Barnier and his United Kingdom (UK) counterpart David Frost worked late into Sunday in Brussels, scrambling to close out a deal after eight months of fraught talks.

Ireland’s Prime Minister Micheal Martin warned the chances for a deal were only “50-50”, while sources close to the talks said discussions were slow and expectations low.

An EU summit will be held on Thursday, when the outline of any deal – or an admission of the failure to find one – will be put to the bloc’s 27 leaders. A source close to the talks said the situation was “very difficult” and that negotiations were in their “last useful days”.

“We are on a very narrow path and it is impossible to predict the outcome,” the source explained.

London opened higher thanks to the weaker pound, while Paris and Frankfurt fell.