Asian shares extend losses on renewed virus scare, inflation woes

    Asian shares extend losses on renewed virus scare, inflation woes
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    An investor looks at a spreadsheet showing stock information on a Beijing real estate company. Photo: REUTERS / FILE

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    An investor looks at a spreadsheet showing stock information on a Beijing real estate company. Photo: REUTERS / FILE

    Asian stocks fell again on Monday, while safe haven assets, including yen and gold, rose higher as appetite for investors was threatened by fears of rising inflation and a steady rise in coronavirus cases.

    The broader MSCI Asia-Pacific Index fell 0.4% for its second straight loss.

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    Japan’s Nikkei fell 1.3 percent, as did Australia’s benchmark stock index. South Korea’s KOSPI was 1% lower, while New Zealand shares were 0.4%.

    Global economic growth is beginning to show signs of fatigue, with many countries, particularly in Asia, struggling to limit the highly contagious Delta variant of the Koran virus and being forced into some form of lock-in.

    The ghost of rising inflation, which the market has long feared, is also haunting investors.

    Bank of America economists have downgraded their forecasts for US economic growth to 6.5% this year, up from 7% previously, but have kept their forecasts at 5.5% for next year.

    “As far as inflation is concerned, the bad news is likely to remain high in the short term,” they said in a note, noting their latest reading from the proprietary inflation meter, which remains high.

    “The good news is … we are probably approaching the top, at least for the next few months, as the key results are less favorable and the pressures of shortage are shifting away from goods to services.”

    US Federal Reserve Chairman Jerome Powell has repeatedly said that inflation is expected to be temporary, indicating that monetary policy will remain supportive for some time to come.

    However, it takes a hard time convincing the markets.

    Aviva Investors, the global asset management company of Aviva plc, expects rapid growth and inflation to put some upward pressure on long-term government bond yields.

    “Therefore, we prefer to be somewhat underweight, mainly through American treasures,” said Michael Grady, chief investment strategist and chief economist at Aviva Investors.

    “Overall, we have a neutral view of currencies.” Foreign exchange activity was silenced on Monday.

    The dollar has just changed against a basket of major currencies at 92,640.

    Against the safe haven yen, the dollar fell 0.2 percent to 109.86, approaching a recent one-month low of 109.52.

    The euro was mainly stable at $ 1.1811.

    Risk-sensitive Aussie fell to $ 0.7392, the lowest level since last December during the first Asian trading session.

    The return of shares in recent days has stressed the nerves of investors.

    For example, the MSCI global index, a global stock index, hit last week’s record but ended 0.6% lower. The Dow closed 0.9 percent, the S&P 500 fell 0.75 percent and the Nasdaq lost 0.8 percent.

    These losses came despite the strongest-than-expected US retail sales last week, which rose 0.6% in June, in contrast to the expected decline.

    Investors’ next radar is June corporate profits with Netflix, Philip Morris, Coca Cola and Intel Corp among the companies expected to report this week.

    Bank of America analysts forecast a profit margin of 11 percent, which they say would help boost investor confidence in the wider economic recovery and lead to a shift in so-called “value” stocks, which are currently trading below what they really deserve.

    Elsewhere, gold, a safe haven asset, rose to spot prices at $ 1,815.4 an ounce.

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