Asian stocks decrease as inflation and Omicron fears rise

On Friday, Asian stocks showed 14-month lows as worries about the new Omicron variant, decisions of the world’s major central banks, and inflation concerns hit investor confidence.

On Friday, MSCI’s broadest index of Asia-Pacific shares fell 0.8% outside Japan to 2.29%.

Chinese blue chips fell 1.36%, heading for their most destructive week in four months, while Hong Kong-listed tech companies’ index hit a record low.

Japan’s Nikkei fell 1.98%, reversing the gains from the previous days.

Pan-region Euro Stoxx 50 futures shed 0.97%, while FTSE futures went down 0.46%. Nasdaq futures lost 0.26%, indicating that the benchmark might extend its heavy losses.

As tapering is on, senior market analyst at Saxo Markets in Hong Kong, Edison Pun, said market volatility should increase now. He added that there is a high probability of the market’s volatility in the U.S. from now on. This can bring more significant actions to Asian markets.

On Wednesday, the Fed declared it would accelerate its emergency bond-buying program’s tapering. It also announced increasing interest rates more from the beginning of 2022 as the economy approaches the surge of employment and inflation.

Senior investment strategist at Standard Chartered Bank, Fook-Hien Yap, said that around half the committee several months ago did not expect the Fed to make any rate hikes in the following two years. Now there are possible three rate hikes in 2022. He also said 2022 would be all about the grapple between growth and inflation. But inflation might fade by the first half of 2022, and rate hikes can move at a more reasonable pace.

U.S. yields decline

In the middle of a vigilant atmosphere, the yield on benchmark 10-year U.S. Treasury notes fell as low as 1.413%, while the two-year yield remained steady at 0.62551%.

Analysts at Westpac said that ordinarily, yields might rise in anticipation of the Fed tightening cycle in the wake of a more hawkish outcome.