Written by Wayne Cole
SYDNEY (Reuters) – Asian stock markets paused on Monday as reports of a possible tightening of contingency rules related to the coronavirus in Tokyo sent Japanese shares back from their 30-year highs, while also raising the safe-haven yen.
Investors still rely on central banks to keep money very cheap, while the release of coronavirus vaccines helps revive the global economy over time, but much of this optimism has already been appreciated and the virus is not cooperating.
It gave up early gains, slipping 1.1% when Fuji TV reported that the government was considering a state of emergency in Tokyo and three surrounding prefectures.
The MSCI’s broadest index of Asia Pacific stocks outside of Japan rose 0.1%, lightening from a record high.
E-Mini futures are down 0.2% after touching a new all-time high in early trade.
Investors are cautiously watching Georgia’s two-seat run-off election in the US Senate on Tuesday that will determine which party controls the Senate.
If Republicans win one or both, they will maintain a slim majority in the House and can block President-elect Joe Biden’s legislative goals and judicial candidates.
CBA analysts noted that “if the Democrats win both races, then Vice President-elect Kamala Harris will be the playoff vote, giving the party unified control of the White House and Congress.”
“This increases the likelihood that the US infrastructure spending package will be quickly tracked by Congress.”
The minutes of the December Fed meeting scheduled for Wednesday should provide more details on discussions about making future policy directions clearer and the opportunity for another increase in asset purchases this year.
The data calendar includes a combination of manufacturing surveys around the world, which will show how the industry is coping with the spread of the Coronavirus, and the ISM closely watched surveys of US factories and services.
A survey showed that factory activity in Japan stabilized for the first time in two years in December, while activity rebounded in Taiwan.
Friday sees the US payroll report for December as a modest average increase of only 100,000 is expected.
Analysts Barclays (LON:) 50,000 jobs down, which should be a shock to the market’s hopes for a quick recovery.
“A number of indicators reported on activity point to slower momentum as the overall economy closes, including data on labor markets where initial claims rose during the December survey period,” economist Michael Gapen said in a note.
Such a drop would add pressure on the Fed to ease further, another burden on the dollar that is already falling under the weight of the massive US budget and trade deficit.
The latter was at 89.786, not far from a 2-1 / 2 year low of 89,515 after falling nearly 7% in 2020.
The euro rose to $ 1.2245, after taking profits late last week when it reached its highest level since early 2018 at $ 1.2309. It has gained nearly 9% during the year 2020.
The dollar fell to 103.02 yen and appeared to be in danger of testing the key support at 102.55. The British Pound was steady at $ 1.3674, close to its recent high of $ 0.13686.
The dollar’s decline was support for gold, leaving the metal 0.6% stronger at $ 1.910 an ounce.
Oil prices held steady after two months of strong gains, with Brent facing resistance around $ 52.50 a barrel. The recovery still leaves Brent down 21.5% for the year, and WTI at 20.5%.
On Monday, futures fell 8 cents to $ 51.72, while 12 cents fell to $ 48.40 a barrel.