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Forums General Discussions Pace of vaccine rollout dissuades Asia stocks from tracking Wall Street ral

Pace of vaccine rollout dissuades Asia stocks from tracking Wall Street ral

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10:55 pm
April 15, 2021

jinmori5

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Posts: 283

Asian shares were mixed Friday as jubilance over positive U.S. economic data and a Wall Street record high were tempered by caution in the region, where the coronavirus vaccine rollout has lagged.

Japan’s benchmark Nikkei 225 JP:NIK gained 0.1% to 29,674.31 in morning trading. Australia’s S&P/ASX 200 AU:ASX10000 fell nearly 0.1% to 7,052.30. South Korea’s Kospi KR:180721 was little changed, inching up less than 0.1% to 3,194.49. Hong Kong’s Hang Seng HK:HSI inched down less than 0.1% to 28,771.21, while the Shanghai Composite CN:SHCOMP added 0.2% to 3,406.93.

The contrast in the speed of the vaccine rollout has been striking between the U.S. and Asia. Nearly half of American adults have gotten at least one dose of the vaccine, and about 30% of adults in the U.S. have been fully vaccinated, according to the Centers for Disease Control and Prevention.

Japan, where inoculations for the public have barely started, has seen a resurgence of infections in recent weeks. The country’s western metropolis of Osaka reported over 1,200 new infections Thursday, its highest since the pandemic began. A top ruling party official suggested the possibility of canceling the Tokyo Olympics, set to start in July, if infections continue to surge.

Prakash Sakpal and Nicholas Mapa, senior economists for ING, said the markets are watching the meeting between Japanese Prime Minister Yoshihide Suga and President Joe Biden, set for the weekend, data from China, including GDP and retail sales, as well as for further news on the pandemic.

“Asian markets will likely track gains overnight with optimism driven by positive US data highlighted by retail sales. Investors now turn their focus to a string of China data reports,” they said in a report.

Wall Street notched more milestones, as a broad market rally pushed the S&P 500 SPX to an all-time high and the Dow Jones Industrial Average DJIA crossed above the 34,000 mark for the first time.

The S&P 500 rose 1.1%, with technology, healthcare and communication stocks accounting for much of the upward move. Only energy and financial companies closed lower. Bond yields BX:TMUBMUSD10Y fell.

The rally came as investors welcomed a suite of encouraging economic reports showing how hungry Americans are to spend again, how fewer workers are losing their jobs and how much fatter corporate profits are getting.

Expectations are very high on Wall Street that the economy — and thus corporate profits — are in the midst of exploding out of the cavern created by the pandemic, thanks to COVID-19 vaccinations and massive support from the U.S. government and Federal Reserve. New data on retail sales and jobless claims Thursday helped bolster the view that the economic recovery is accelerating.

See: Retailers ring up blowout 9.8% sales gain in March due to stimulus checks and revved-up economy

“Another day, another record,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “The stock market continues to validate the optimistic forecasts from last year, which predicted a strong economy that was driven by consumers emerging from their homes, emboldened by vaccinations or by a belief that the worst of COVID was behind us.”

Coronavirus Update: Global tally of COVID-19 cases tops 138 million as CDC committee opts to extend pause on J&J vaccine

The S&P 500 rose 45.76 points to 4,170.42, surpassing its previous record high of 4,141.59 set on Tuesday. The Dow climbed 305.10 points, or 0.9%, to 34,035.99.
The Nasdaq composite added 180.92 points, or 1.3%, to 14,038.76, while the Russell 2000 RUT index of smaller companies picked up 9.35 points, or 0.4%, to 2,257.07.

U.S. retail sales jumped 9.8% in March from February, blowing past economists’ forecasts for 5.5% growth. Much of the surge was due to $1,400 payments from the U.S. government’s latest economic rescue effort hitting households’ bank accounts.

Economists said it shows how primed people are to spend as the economy reopens and conditions brighten. That’s huge for an economy that’s made up mostly of consumer spending.

Another report gave an encouraging read on the job market, showing 576,000 people applied for unemployment benefits last week. That’s well below the 700,000 that economists had forecast and down from 769,000 the prior week. It’s also the lowest number since the pandemic.

Adding to the optimism, more big U.S. companies reported even healthier profits for the first three months of 2021 than analysts had forecast. Expectations are already high for this earnings reporting season, which unofficially got underway on Wednesday and could result in the strongest growth in more than a decade.

“You’ve got various pockets of the market now starting to show a broadening recovery,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

BlackRock BLK, PepsiCo PEP and UnitedHealth Group UNH all reported bigger profits for the first quarter than analysts expected. BlackRock rose 2.1%, PepsiCo added 0.1% and UnitedHealth climbed 3.8%.

Even Delta Air Lines DAL, which reported weaker results for the start of 2021 than expected, highlighted areas of optimism. It said it could return to making profits by late summer if the recovery it’s seeing in air travel continues. Its shares fell 2.8%.

In energy trading, benchmark U.S. crude UK:CRUDE OIL - WTI CRUDE OIL - ELECTRONIC fell 19 cents to $63.27 a barrel. Brent crude UK:BRENT CRUDE, the international standard, slipped 19 cents to $66.75 a barrel.

In currency trading, the U.S. dollar inched up to 108.91 Japanese yen USDJPY from 108.77 yen. The euro USDEUR cost $1.1956, down from $1.1984.

At 10% of current gross domestic product, doled out over eight years, the plan reads like a Rooseveltian blueprint for economic and social engineering. More than $600 billion would go to conventional projects like roads, bridges, and public transit. There is $374 billion for tech, according to Goldman Sachs, including rural broadband, modernizing the electric grid, clean-energy storage, and electric vehicles.

U.S. manufacturing and research and development would receive subsidies and incentives worth $480 billion. And $500 billion would go for the caregiving economy and workforce development.

Packages like this bring out the knives in Congress. Opposition is already building over the cost and funding mechanism, including an increase in the corporate tax rate to 28%. Without Republican support in the Senate, where Democrats can’t afford a single defection, a bill would need to pass under complex budget reconciliation rules and wouldn’t be ready for a vote until the summer.

All of this assumes that financial markets cooperate. Ultralow interest rates are keeping a lid on the Treasury’s funding costs. But Treasury yields have been rising as traders price in higher inflation and widening deficits due to all of the fiscal stimulus that has already been injected—$5 trillion and counting. The Biden plan won’t pay for itself for 15 years, assuming its tax increases hold up. Higher deficits imply more Treasury issuance at potentially higher yields, raising the bill on taxpayers.

Another caveat is that infrastructure spending is like an intravenous drip that trickles through the economy’s veins for years. There aren’t enough “shovel-ready” projects to soak up anything close to $2 trillion. Indeed, infrastructure may be the messiest form of stimulus: It is distributed unevenly to states and localities, held up by zoning and contracting issues, and overseen by a patchwork of federal and state environmental rules. The economy may benefit long term from stronger growth and productivity gains, but it won’t happen right away.

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