Wayne Cole

SYDNEY, (Reuters) – Asian shares markets started to lose steam on Thursday due to Omicron spreading. This is the final trading day for many global exchanges. However, oil had a close finish to 2021 with more than half off.

Coronavirus cases reaching record levels, countries around the world are working to mitigate economic harm by allowing for more isolation and less lockdowns.

Some positive data came from South Korea. A 5.1% increase in South Korea’s November industrial output may signal an end to global supply shortages.

But 2021 was a difficult year for many in the region. MSCI’s largest index of Asia-Pacific shares, which isn’t Japan-based, was down 6% per annum.

Chinese bluechips also saw 6% declines due to large falls in technology as Beijing tightened sector restrictions.

The stock market fell 0.7% Thursday. This left the country with an average gain of 4.6% over the past year, and a long way from its three-decade high in September. Tokyo will be closed Friday.

Taiwan was a top performer, with 24% increase due to high demand and limited supply.

BofA Analyst Ajay Kapur believes there is some upside in Asian markets for the short term, but is cautious from the second quarter because that’s when global liquidity will peak after the Federal Reserve ceases buying assets.

On China, he is bearish as a result of his expectations that the economy will slow further and earnings would disappoint.

In early trade, Nasdaq futures fell 0.2%

Wall Street’s stellar year has been due to the extraordinary policy stimulus and upbeat corporate earnings. This is the largest three-year increase in value since 1999.

The Nasdaq has a 22% advantage over last year. However, this can be attributed to dramatic increases in the values of seven technology groups. Apple (NASDAQ:), alone accounts for 11%.

The persistence of U.S. inflation and the resulting Fed hawkish turn have caused stress to bond markets. Investors are now pricing in a March-May rate increase.

The yields on two-year bonds have risen 55 basis points to 0.75% since September, which is close to the record set in March 2013.

The yield curve flattening has been more noticeable for longer-term bonds. This suggests that investors believe that a Fed with a greater degree of aggressiveness will result in slower inflation, growth and lower rates at the peak.

The 10-year yields for 10 years rose 6 basis points to 1.55% on Thursday. However, they were still well below their April peak of 1.776%.

While the Fed’s forecast has combined with safe haven flows to strengthen the U.S. currency, there was some profit taking overnight. However, the euro bounced up to $1.1351 over the November trough at $1.1184.

Most of the activity was in the Japanese yen which experienced broad year end selling the week before. At 130.53yen the euro was at its highest level since November, while at 115.04yen it was at its lowest.

The price of gold in commodities markets was constant at $1.804 an ounce. This however left it about 5% lower over the course of the year.

After government data revealed that inventories had fallen last week, oil prices rose Wednesday. This was despite concerns about rising coronavirus infections reducing demand. [O/R]

The year ended with a record-setting oil price, rising more than half a barrel amid tight supplies. This contributed greatly to the inflation rate.

U.S. crude fell 9c to $76.47 per barrel on Thursday. Brent, however, was unchanged at $79.23