Asian markets mixed as inflation fears play against recovery hopes

HONG KONG: Asian markets were mixed Thursday on profit-taking and growing worries about inflation, which offset long-running optimism about the global recovery as vaccines are rolled out, infection rates slow and Joe Biden's stimulus winds through Congress.

Oil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity's strong performance in recent months.

Confidence that the world economy will enjoy a scorching rebound from last year's collapse has fired global equities and other risk assets for months as immunisation programmes allow people to slowly get back to a semblance of normality as lockdowns are eased.

Underpinning that has been vast amounts of government spending as well as ultra-loose central bank monetary policies and pledges of continued support until the recovery well underway.

But that has led to expectations of a surge in inflation and a spike in US Treasury yields to around one-year highs, sparking worries of higher borrowing costs down the line.

And it is these fears, along with warnings equities may have run ahead of themselves, that are playing on investors' minds.

Those concerns were now allayed by a forecast-beating jump in US retail sales last month and wholesale inflation climbed at its fastest pace since the index was revamped in December 2009.

"Strong US economic data dampened the argument that the economy still needs massive stimulus and as rising inflation expectations start to weigh on valuations," said OANDA strategist Edward Moya.

"Technology stocks are leading the decline as pricing pressures will likely have the biggest impact on their bottom line. The skyrocketing move in yields is triggering some investors to take off some of their most profitable frothy trades."

Crude extends gains

Still, observers said the surprise jump would be unlikely to shift the Federal Reserve from its course as the economy continues to be threatened by the pandemic and is "far from" achieving growth and employment goals.

While the Dow edged to another record high, the S&P 500 and Nasdaq both dipped.

Asian markets swung through the morning. Tokyo, Sydney, Taipei and Jakarta were all up while Shanghai put on one percent as it reopened after the week-long Lunar New Year break.

But Hong Kong, Singapore, Seoul, Wellington and Manila were all in the red.

Stephen Innes at Axi said while rising yields and price concerns remained, "improving Covid-19 trends and robust economic data allow investors to turn their attention to updates on reopening timelines -- especially from the UK and the US as cries for a quicker end to mobility restrictions grow more vocal".

Oil prices rallied more than one percent as economic reopening optimism is mixed with news that the US cold snap had hammered output, with Bloomberg News reporting 40 percent of the nation's production had been hit.

The US troubles overshadowed Riyadh's decision to ease production cuts within the next few months.

"I don't think the markets were overly shocked about the Saudi rollback amid the roaring recovery in global demand, good news on the Covid-19 vaccine roll-out, and the extremely healthy oil price," Innes added.

Bitcoin tapped another record of $52,631, just days after breaking $50,000.