AFP, Hong Kong :
Asian markets drifted Friday as a broadly positive week drew to a close with investors pricing in the likelihood that Federal Reserve officials will start withdrawing the vast financial support put in place at the start of the pandemic.
The fast-spreading Delta virus variant, which is forcing governments to introduce containment measures, and the Chinese government’s campaign to tighten its grip on the world’s number two economy were also playing on sentiment.
Data on Thursday showed US producer prices rose more than twice as much as forecast on-month in July, while the annual rate hit a record, reinforcing traders’ belief that the blockbuster economic recovery was putting huge pressure on inflation.
The figures ramped up expectations the Fed, in a bid to prevent overheating, will start reducing its colossal bond-buying programme earlier than it had thought.
“Global investors are assessing the implications of the spread of the Delta virus, the possible tapering by the Fed, and China’s clampdown,” said Geir Lode, of Federated Hermes.
“With equity markets almost doubling since the start of the pandemic and a bull market lasting over a decade, investors are questioning how far the bull market can rally.” “We therefore think that the inflation risk is on the upside and that the Fed will start tapering at the end of the year,” he added.
However, while the ultra-cheap borrowing that has been key to propelling the pandemic rally for more than a year looks likely to end, traders remain broadly upbeat, with the Fed-and other central banks-likely to take time withdrawing the support.
