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Asian shares hit 1-wk lows on renewed virus scare, inflation worry

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SYDNEY – Asian shares fell to a one-week low on Monday and saw safe-haven assets, including the yen and gold, edged higher amid rising and rising inflation fears coronavirus cases, while oil prices fell due to oversupply concerns.

MSCI’s broadest index of Asia-Pacific shares outside of Japan fell 1.1% for a second straight day, falling to 677.45, levels not seen since July 12. The index is on track for its biggest daily percentage drop since July 8.

Japan’s Nikkei index fell 1.3% as did Australia’s benchmark equity index. South Korea’s KOSPI was 1% lower, while China’s stocks also started their gains with the blue-chip index falling 0.6%.

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Oil prices fell more than 1% following an agreement over the weekend among OPEC+ producers to boost output at a time when the demand outlook remains dim.

Global economic growth is starting to show signs of fatigue while many countries, especially in Asia, are struggling to contain the highly contagious Delta variant of the coronavirus and have been forced into a number of forms. door lock mode. The specter of high inflation that the market has long feared is also haunting investors.

Economists at Bank of America downgraded their forecast for US economic growth to 6.5% this year, from 7% previously, but left their 5.5% forecast for next year unchanged.

“As for inflation, the bad news is likely to remain bullish in the near term,” they said in a note, pointing to their latest reading from their proprietary inflation gauge remaining high.

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“The good news is… we may be near a peak, at least for the next few months, as fundamentals are less favorable and shortage pressure shifts from goods to services.”

US Federal Reserve Chairman Jerome Powell has repeatedly said that any inflationary flare-ups are expected to be temporary, suggesting that monetary policy will remain accommodative for some time.

However, the market is still hard to convince.

Aviva Investors, the global asset management business of Aviva plc, expects rapid growth and inflation to put upward pressure on long-term government bond yields.

“As a result, we want a slightly lighter term, primarily through US Treasuries,” said Michael Grady, head of investment strategy and chief economist at Aviva Investors. “Overall, we have a neutral stance on the currency.”

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Action in the currency markets was muted on Monday.

The dollar was slightly stiffer against a basket of major currencies at 92.712.

Against the safe-haven yen, the dollar fell 0.2% at 109.90, moving closer to a recent one-month low of 109.52.

The euro was mostly unchanged at $1.1801.

The risk-sensitive Aussie fell to $0.7372, its lowest since December last year during early Asian trading.

Stock performance in recent days shows the anxiety of investors.

MSCI’s all-country world index, a measure of global equities, hit a record high last week but ended 0.6 percent lower. On Friday, the Dow closed down 0.9%, the S&P 500 fell 0.75% and the Nasdaq lost 0.8%.

The losses came despite a stronger-than-expected increase in US retail sales last week, up 0.6 percent in June, in contrast to the expected drop.

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Next on investors’ radar is June quarter corporate earnings with Netflix, Philip Morris, Coca Cola and Intel Corp among those expected to report this week.

Bank of America analysts forecast an 11 percent earnings gain, which they say should help inject investor confidence in the broader economic recovery and spur a return to so-called equities. “value”, currently trading below their true value.

Elsewhere, gold, a safe-haven asset considered safe, inched up for spot prices at $1,815.4 an ounce.

Brent crude fell 90 cents to $72.69 a barrel. US crude fell 83 cents to $70.98 a barrel.

(Reporting by Swati Pandey; editing by Shri Navaratnam and Richard Pullin)

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