European benchmarks rose on Tuesday but Asian stocks mostly fell after a dip on Wall Street.
France’s CAC 40 added 0.6% in early trading to 7160.56, while Germany’s DAX added 0.7% to 15882.28. Britain’s FTSE 100 Index rose 0.4% to 7,744.60. US stocks are set to drift higher with Dow futures up less than 0.1% at 35965.00. S&P 500 futures rose 0.1% to 4,664.50.
Investors are watching the rising numbers of coronavirus cases, especially in China, where a third city has shut down its residents due to the COVID-19 outbreak, bringing the number confined to their homes to nearly 20 million people.
“In China, the bullish momentum quickly faded and was reversed as COVID-19 restrictions tightened again in some Chinese cities,” said Jeffrey Haley, chief market analyst at Oanda.
Such disruptions could have region-wide repercussions on trade and other activities. Major companies, including automakers like Toyota, have been counting on recovering supplies of semiconductor chips and other products from China and the rest of Asia, as vaccinations and other coronavirus prevention efforts advance. The recent increase in the number of infections with the novel coronavirus Omicron has shaken such hopes.
Japan is also seeing a spike in reported COVID cases, which experts say are mostly omicron. Japan has decided to maintain strict border controls for the next month, which ban entry to travelers except for residents and returning citizens. Japanese Prime Minister Fumio Kishida said the large-scale facilities run by the Japanese military to give vaccines, which closed last year, will reopen to speed up booster shots. So far, less than 1% of the population has received the boosters.
Japan’s benchmark Nikkei 225 fell 0.9% to close at 28222.48, returning from a national holiday on Monday. South Korea’s Kospi gained less than one point to 2,927.38. Australia’s S&P/ASX 200 fell 0.8% to 7,390.10. Hong Kong’s Hang Seng fell less than 0.1% to 23,739.06, while the Shanghai Composite fell 0.7% to 3567.44.
Federal Reserve Chairman Jerome Powell, in remarks made at a congressional hearing on Tuesday, acknowledged Powell’s nomination for a second four-year term.
Higher interest rates make shares of expensive technology companies and other expensive growth companies less attractive to investors, and the sector is declining as bond yields rise. The tech sector was the biggest weight in the market until January and is coming off its worst week since October 2020.
Raising interest rates may rein in higher rates, but it will also put an end to the easy money conditions that have kept financial markets buoyant since the first shocks of the pandemic in early 2020. The market is now setting the chances of the Federal Reserve raising short-term rates by at least a quarter point in March at about 78%. A month ago it was around 36%.
Looking ahead, the US Labor Department will release its Consumer Price Index for December on Wednesday. The agency will provide investors with details of how inflation is affecting business with its December PPI on Thursday. On Friday, Citigroup, JPMorgan Chase and Wells Fargo will announce their latest quarterly financial results.
In energy trading, the price of US crude rose $1.30 to $79.53 a barrel in electronic trading on the New York Mercantile Exchange. It lost 67 cents to $78.23 on Monday.
Brent crude, the international standard, rose $1.18 to $82.05 a barrel.
In currency trading, the US dollar rose to 115.27 Japanese yen from 115.20 yen. The euro was trading at $1.1348, up from $1.1326.