February 26, 2021

Asian Markets Fall Despite Efforts by Policy Makers

HONG KONG — Asian stock markets continued to slide Monday morning, and gold continued its ascent, despite efforts by policy makers around the world to restore battered financial-market confidence over the weekend.

The falls were not as dramatic as they had been at the end of last week, when Asia-Pacific markets had sagged sharply. The Nikkei 225 index in Japan and the Kospi in South Korea both slipped 1.3 percent by mid-morning, the Australian market fell 0.8 percent.

The Straits Times in Singapore fell 2.3 percent, and in Taiwan, the Taiex declined 1.1 percent.

Futures on the Standard Poor’s 500 were 1.8 percent lower, further underscoring the worries of investors as they tried to assess the implications of the decision by Standard Poor’s late Friday to lower its credit rating of the United States.

Gold, considered a haven in times of uncertainty, rose to yet another nominal record high, vaulting $1,690 per ounce.

Worries over the financial health of Italy and Spain also continued to mount, prompting the European Central Bank on Sunday to signal that would intervene more aggressively in bond markets to prevent borrowing costs for Spain and Italy from rising to unsustainable levels.

The Group of 7 industrialized nations followed suit, issuing a statement early Monday that it was ready to “take all necessary measures to support financial stability and growth.”

Many analysts stressed that Standard Poor’s downgrade of the United States’ rating had been well telegraphed, and was unlikely to sharply raise U.S. borrowing costs.

“The downgrade to U.S. debt is unlikely to have any material impact on the U.S. economy or on Asian economies,” analysts at UBS wrote in a note on Monday.

“It’s important to note that there is no regulatory requirement for U.S. investment institutions to sell long-term U.S. Treasuries if they are not rated AAA, ditto for short-term treasuries, and Asian central banks will continue to buy U.S .Treasuries as a corollary to exchange rate intervention to protect exporters. (They don’t have much choice.)”

Blackrock echoed this in a statement on Monday: “The downgrade of U.S. sovereign credit by S.P. on Friday reflects facts that have been well known to the market for some time. So, it does not imply a fundamental increase in risk, and we don’t believe that investors should change their behavior based solely on the downgrade.”

Still, the worries extend beyond the issue of the credit rating to the wider U.S. economic recovery, which appears to be floundering. Jobs data released Friday showed a slightly better picture than expected, and helped support Wall Street Friday. But a flurry of other data have painted a bleak picture in recent weeks.

“What really matters is the fact that the U.S. is struggling to sustain growth, U.S. monetary policy is likely to remain on hold for longer than previously thought, and Europe will remain problematic for the time being,” the UBS analysts wrote.

For Asia, which, with the exception of Japan, is less indebted than many Western nations, and generally enjoys solid growth and domestic demand, the outlook remains comparatively positive.

S.P. said in yet another statement on Monday that “in and of itself, there is no immediate impact on Asia-Pacific sovereign ratings” from its downgrade of the United States.

Further down the line, however, “the U.S. rating change, together with the weakening sovereign creditworthiness in Europe, does point to an increasingly uncertain and challenging environment ahead.”

The growing market and economic uncertainties, it added “are negative factors for Asia-Pacific sovereign ratings. “

Article source: http://feeds.nytimes.com/click.phdo?i=3eced2c36687d19ced55c6955f95933d

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