Asian markets sank into the red Tuesday following the previous day’s healthy run-up, with sentiment jolted by the prospect that Joe Biden’s huge stimulus could be watered down and not even be passed for several weeks.
Investors have been on a buying spree since November when Biden won the presidency and vaccinations began to be authorised, with the usual support also coming from central bank support and government spending.
But while the general feeling on trading floors is of optimism about the long-term outlook, confidence is being tested by surging virus infections and deaths, lockdowns and problems in rolling out inoculations.
The biggest driver of the market rally in recent weeks has been hope for Biden’s $1.9 trillion economic rescue plan.
But there is a growing concern that that it could be whittled down in Congressional negotiations with Republicans and even some Democrats concerned about its size, particularly in the wake of a $900 billion deal passed at the end of last month.
“I don’t expect we’ll know whether we have an agreement or to what extent the entire package will be able to pass or not pass until we get right down to the very end of this process — which will be probably in a couple weeks,” Biden said Monday.
Democratic Senate Majority Leader Chuck Schumer said the bill would not likely be ready until March, just as benefits from the previous package wind down.
“We’ll try to get that passed in the next month, month and a half,” he said in a call with New York City mass-transit advocates.
– Vaccine warning –
While the S&P 500 and Nasdaq both ended at new record highs on Wall Street, the Dow slipped.
And Asian traders were in a selling mood Tuesday, with Hong Kong and Manila all losing more than one percent while there were also sizeable losses in Tokyo, Shanghai, Singapore, Taipei and Jakarta. Wellington and Bangkok rose. Sydney was closed for a holiday.
Seoul also shed more than one percent after data showed the South Korean economy suffered its worst year since 1998, when the Asian financial crisis rocked the region.
Virus concerns continue to cast a shadow, and the World Health Organization provided a dose of reality Monday as the head of its emergencies programme warned the rollout of vaccines will not reach a level that would stop transmission in the foreseeable future.
“The bar for success is reducing the capacity of this virus to kill, to put people in hospital, to destroy our economic and social lives,” Mike Ryan said, adding that there were not even enough for those most at risk.
The comments come after British-Swedish drug company AstraZeneca said it will not be able to meet its promised targets on EU shipments — a week after US group Pfizer said it was also cutting delivery volumes.
However, Biden said he was “confident” the US would be able to reach herd immunity by the summer.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: DOWN 0.6 percent at 28,641.13 (break)
Hong Kong – Hang Seng: DOWN 1.5 percent at 29,715.79
Shanghai – Composite: DOWN 0.9 percent at 3,591.59
Euro/dollar: UP at $1.2144 from $1.2141 at 2130 GMT
Dollar/yen: DOWN at 103.71 yen from 103.77 yen
Pound/dollar: DOWN at $1.3672 from $1.3675
Euro/pound: DOWN at 88.81 pence from 88.79 pence
West Texas Intermediate: DOWN 0.2 percent at $52.69 per barrel
Brent North Sea crude: DOWN 0.2 percent at $55.75 per barrel
New York – Dow: DOWN 0.1 percent at 30,960.00 (close)
London – FTSE 100: DOWN 0.8 percent at 6,638.85 (close)
— Bloomberg News contributed to this story —