Markets in Shanghai, Singapore and Taipei gained but there were minor losses in Tokyo, Seoul, Wellington and Manila
Stocks in Asia were mixed on Monday following last week’s rally, with worries about US Fed’s monetary policy easing as sentiment is driven by the bright outlook for the global economy.
The bipartisan agreement between US lawmakers Thursday on a huge infrastructure deal provided a further boost to upbeat investors, who have also been calmed by the Fed’s pledges to maintain record-low interest rates and vast bond-buying for as long as required.
Even a sharp spike in gauge of consumer spending for May was taken in stride, with much of the surge being attributed to rallying energy costs.
However, Asia struggled to maintain momentum on Monday after another record close on Wall Street.
Shanghai, Singapore and Taipei gained but there were minor losses in Tokyo, Seoul, Wellington and Manila, while Sydney was flat. Hong Kong was closed in the morning due to heavy storms in the city.
Observers warned that while the general mood was positive, investors remained on edge as inflation continues to be a worry.
The Fed are far away from tapering, they are far away from increasing rates, but at some point, if the markets sees the Fed being too far behind the curve you will start to see some adjustment on the long end of the curve, Charles-Henry Monchau, at FlowBank SA, told Bloomberg TV.
We might not have seen the peak in bond yields. I would not be surprised to see some adjustments in the coming months. That might be an excuse for the market to take a bit of profit, he said.
Traders will also be keeping a close eye on Washington after Joe Biden, Democrats and Republicans came together for a rare agreement on the near $1 trillion roads and bridges plan, with the president acknowledging there was no guarantee the package would get through Congress.
The White House on Saturday stepped back from a call to link it to a wider tax-and-spending bill — including priorities like climate change mitigation, child care, schools and social services — that is opposed by Republicans.
The announcement was seen as a threat by Biden to veto the new agreement.
Still, National Australia Bank’s Ray Attrill said: One of the catalysts for US equities achieving new record highs last week was the news of a handshake deal between the president and a bipartisan group of senators, but some Republican senators now ‘smell a rat’ in so far as voting for the infrastructure bill could be akin to also voting for the American Families Plan.
He added that developments here promise to be one source of market volatility in the week ahead.