Asia report: Stocks weaker as Omicron reaches China

Stocks were weaker across the board in Asia on Tuesday, as concerns around the economic impact of the ‘Omicron’ Covid-19 variant reemerged.

In Japan, the Nikkei 225 was down 0.73% at 28,432.64, as the yen weakened 0.04% against the dollar to last trade at JPY 113.59.

It was a negative day for the benchmark’s major components, with robotics specialist Fanuc down 0.99%, Uniqlo owner Fast Retailing falling 2.72%, and technology giant SoftBank Group 0.88% weaker.

The broader Topix index was off 0.22% by the end of trading in Tokyo, closing at 1,973.81.

On the mainland, the Shanghai Composite was down 0.53% at 3,661.53, and the smaller, technology-centric Shenzhen Composite slipped 0.14% to 2,558.25.

South Korea’s Kospi was 0.46% lower to dip below the 3,000-point level, closing at 2,987.95, while the Hang Seng Index in Hong Kong was down 1.33% at 23,635.95.

Technology plays were among the leading losers in the special administrative region, with Alibaba down 1.98%, JD.com off 2%, and Tencent 1.46% weaker.

Weibo Corporation, which owns Chinese social media giant Sina Weibo, plunged 9.62% after it was fined CNY 3m by Beijing’s internet regulator.

China Mobile - the world’s largest mobile network operator by subscriber numbers - was off 0.54% in Hong Kong, after the company said its application for a secondary listing in Shanghai had been approved.

The company, which remains state-controlled through the China Mobile Communications Corporation, said it planned to offer up to 845.87 million shares through the Shanghai listing.

Seoul’s blue-chip technology stocks were mixed, with Samsung Electronics going against the sector’s regional trend to rise 0.26%, while LG Electronics plunged 4.1% and SK Hynix was 0.41% lower.

Omicron was at the top of the agenda in the region on Tuesday, after the UK confirmed the first death of a person infected with the Covid-19 variant on Monday.

Infection modellers had predicted that the variant was already accounting for 40% of all new infections in London, and was spreading so fast that it would become the dominant variant in the British capital as early as Tuesday.

Authorities in China also reported its first case of Omicron earlier on Tuesday.

There was also growing concern that existing vaccine protection was nowhere near effective enough against the variant, with the University of Oxford releasing research on Monday that two doses of either the AstraZeneca or Pfizer-BioNTech jab were much less effective against Omicron infection than previous iterations of Covid-19.

The research paper, which was yet to be peer-reviewed, said some study participants “failed to neutralise” the virus at all after two vaccine doses.

“An air of caution gripped Asian markets on Tuesday as growing unease over the spread of the Omicron variant drained risk sentiment,” said FXTM senior research analyst Lukman Otunuga.

“The dollar held its ground despite US Treasury yields slipping in the previous session, while gold prices remained range bound, waiting for a fresh directional catalyst.

“European equity futures are mixed this morning with investors clearly on edge ahead of a week dominated by central bank decisions and key economic reports.”

Otunuga said any decisions made on monetary policies would set the tone for the rest of 2021, while “heavily impacting” risk markets.

“With the Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank all expected to keep monetary policy unchanged, all eyes will be on the FOMC meeting on Wednesday.

“Expectations remain elevated over the Fed announcing a faster pace of tapering in the face of rising inflation and using more hawkish language than has been seen in previous statements.

“If this does become reality, it could weigh on stock markets while boosting the dollar.”

Oil prices were marginally higher as the region went to bed, with Brent crude last up 0.01% at $74.40 per barrel, and West Texas Intermediate also rising 0.01% to last trade at $71.30.

In Australia, the S&P/ASX 200 was down just 0.01% at 7,378.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was off 0.5% at 12,929.59.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.13% weaker at AUD 1.4038, while the Kiwi strengthened 0.07% to last trade at NZD 1.4795.