Asian markets skid on jitters over future U.S. Fed action

Asian markets skidded on Monday, with Japan’s Nikkei 225 index down 3.4%, after a sell-off Friday on Wall Street gave the S&P 500 its worst weekly loss since February.

Investors are still recalibrating their moves after the Federal Reserve’s signal last week that it may raise current ultra-low rates sooner than had been expected. That gave the Dow Jones Industrial Average its worst weekly loss since last October.

Part of the Fed’s mission is to keep prices under control. The fear is that burgeoning inflation may prompt central banks to dial back the lavish support that has lifted markets to new highs after they plunged at the onset of the coronavirus pandemic last year.

Until its latest policy meeting, last week, the Fed had indicated it viewed recent price hikes as transient and would let the recovering economy run hot. Now it’s forecasting raising interest rates twice in 2023.

“The shift to an earlier timeline for a rate hike, accompanied with an upward revision in core inflation forecast to 3%, seems to suggest that the Fed may still be concerned about inflationary pressures to some extent as opposed to its previous stance of letting inflation run wild,” Yeap Jun Rong of IG said in a commentary.

South Korea reported its exports rose nearly 30% in the first 20 days of June in the latest indication that the region’s recovery is steaming ahead despite lingering outbreaks of infections in many places.

The Nikkei gave up 983 points to 27,980.87 and the Kospi in Seoul lost 1.3% to 3,227.92. Hong Kong’s Hang Seng index also lost 1.3%, to 28,427.13. Australia’s S&P/ASX 200 declined 1.7% to 7,243.50 and the Shanghai Composite index declined 0.3%, to 3,514.61.

On Friday, the S&P 500 fell 1.3% to 4,166.45 in a broad retreat, while the Dow Jones Industrial Average lost 1.6%, to 33,290.08. The Nasdaq composite fell 0.9% to 14,030.38.

The Fed also has begun talks about slowing its US$120 billion of monthly bond purchases, which are helping to keep mortgages and other longer-term borrowing cheap. But the Fed’s chair has said such a tapering is still likely a ways away.

Markets were spooked after St. Louis Federal Reserve President James Bullard said Friday on CNBC that his personal prediction was that the first rate increase may come as soon as next year.

It’s an acknowledgment that a rebounding economy with near-record prices for homes and stocks may not need super low rates much longer. A recent burst of inflation may also be upping the pressure. But any pullback in Fed support would be a big change for markets, which have been feasting on ultra-low rates for more than a year.

The Dow industrials lost 3.5% last week. The Nasdaq composite, which has more high-growth tech stocks, dipped a much more modest 0.3%.

Still, the major U.S. stock indexes remain relatively close to their record highs, as the economy continues to leap out of the recession caused by the pandemic. The S&P 500 is only about 2% below its all-time high set on Monday, and the Dow is within 5% of its record set last month.

A measure of nervousness in the stock market, known as the VIX, rose Friday but is only back to where it was about a month ago.

The 10-year Treasury yield eased to 1.40% on Monday from 1.43% late Friday.

In other trading, U.S. benchmark crude oil rose 45 cents to $72.09 per barrel in electronic trading on the New York Mercantile Exchange. It gained 60 cents to $71.64 on Friday. Brent crude, the international standard, picked up 35 cents to $73.86 per barrel.

The U.S. dollar was at 109.83 Japanese yen, down from 110.27 on Friday. The euro was unchanged at $1.1861.

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Stock-market futures slip, bond yields pop near 1% amid razor-thin Georgia races

Wall Street had Georgia squarely on its mind Tuesday night, with equity futures and bonds mostly in the crosshairs as investors eyed dual contests for key Senate seats coming down to razor-thin margins in early returns.

MarketWatch’s Victor Reklaitis reported that analysts are describing the Georgia races as “about as close as you can get,” and there are expectations that the winners won’t be declared until Wednesday morning.

At last check, tallies from populous Democratic-leaning counties, particularly in Dekalb, which could swing the vote tally, were looming.

Democratic challenger Jon Ossoff was trailing incumbent Republican Sen. David Perdue, with over 90% of the vote counted, after enjoying a handy lead earlier, according to data aggregated by the Associated Press.

In the other runoff, Democrat Raphael Warnock was also running slightly behind against incumbent GOP Sen. Kelly Loeffler.

The Senate races are runoffs from the November general election, when none of the candidates hit the 50% threshold required to be declared winner.

At stake for the markets is the prospect of a slim Democratic majority in the Senate if candidates can upend GOP incumbents.

Senate Republicans, if either Loeffler or Perdue wins Tuesday night, can be expected to block further coronavirus relief legislation and crimp any Democratic plans for expansive spending after President-elect Joe Biden takes office, experts said.

A Democratic sweep in Georgia, however, would give that party virtual control of that chamber because Vice President–elect Kamala Harris would cast tiebreaking votes as the chamber’s president.

Futures for the S&P 500 index


were off 0.7%, while those for the Dow Jones Industrial Average


were 0.3% lower, and Nasdaq-100 futures


were off 1.3% late Tuesday.

In the regular session, the Dow
S&P 500 index

and the Nasdaq Composite Index

finished the session solidly higher ahead of the political face-offs.

However, some of the biggest moves were emanating from the bond market, with the 10-year Treasury yield

knocking on the door of 1%, at around 0.985%, as prices fell, after rates finished at 0.955%, marking its highest 3 p.m. Eastern close since Dec. 4, according to Dow Jones Market Data. The 30-year Treasury bond

also was up nearly 4 basis points yielding 1.744% vs. an afternoon close at 1.705%, also its highest rate in a month.

For the bond market, Democratic wins could add to the bearish pressure on Treasurys as analysts say inflation expectations have risen in response as Congress may be more inclined to pass additional fiscal spending measures with a majority, which would weigh on bond prices, dragging yields up.

“It looks like a couple of the larger democratic counties haven’t been totally counted yet so my belief is this may very well swing to the Democrats,” Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, told MarketWatch.

“If that does happen rates will continue to rise over the next few days. We could very well see 10yr yields near 1.2% shortly,” he wrote.

It is nearly impossible to surmise what outcome Wall Street deems is best suited to push stocks further higher in 2021. Last year, market participants had been wagering that a Biden presidential victory, coupled with Democrats achieving a majority in the Senate, would provide the best scenario for additional financial relief measures to help sustain the economy’s recovery from the Covid-19 pandemic.

However, a blue wave failed to manifest and markets surged into the final weeks of 2020 regardless.

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Samsung’s billionaire chairman died on Sunday. He once counted Warren Buffett as a shareholder

  • Samsung’s chairman, Lee Kun-hee, died on Sunday at age 78.
  • The boss of the South Korean conglomerate once counted Warren Buffett as a shareholder.
  • Buffett, a billionaire investor and the CEO of Berkshire Hathaway, made “hundreds of millions” from a rare overseas bet on Samsung, he revealed in a CNBC interview in 2018.
  • “It was a big, strong, good company,” he said.
  • Visit Business Insider’s homepage for more stories.

Samsung’s billionaire chairman, Lee Kun-hee, died on Sunday at age 78 after an extended illness. He once counted Warren Buffett, the famed investor and Berkshire Hathaway CEO, as a shareholder.

Lee’s father, Lee Byung-chull, founded Samsung as an exporter of fish, fruit, and noodles in 1938. Lee took the reins in 1987 and helped grow the South Korean company into a sprawling global conglomerate with interests in consumer electronics, microchips, home appliances, medical equipment, life insurance, shipbuilding, and theme parks.

Read more: GOLDMAN SACHS: Buy these 13 unloved vaccine stocks that have the potential to spike on positive treatment updates

There are clear similarities between Samsung and Buffett’s Berkshire Hathaway.

Both own scores of businesses across numerous sectors such as insurance, energy, manufacturing, construction, transportation, and retail.

Berkshire also holds billion-dollar stakes in Apple, Bank of America, Coca-Cola, American Express, and other public companies.

The similarities may have been a factor in Buffett’s decision to invest in Samsung, despite sticking to American businesses for most of his career. He revealed the rare overseas bet during a CNBC interview in 2018.

Berkshire bought a “reasonable amount” of Samsung stock when it was trading at about 1 million won ($886) per share, Buffett said. That price equates to 20,000 won following the group’s 50-for-1 stock split in 2018. 

The investor was drawn to the South Korean company’s low valuation and robust balance sheet, along with the prospect of share buybacks.

“It was very, very cheap,” Buffett said. “They had a lot of cash. They hadn’t done much buying of their stock but they’d talked about it.”

“It was a big, strong, good company,” he added.

Read more: ‘The road to financial implosion’: A notorious market bear says the Fed has set the stage for a 67% stock plunge — and warns of zero-to-negative returns over the next 12 years

Berkshire set its sights on South Korea because stocks were “ridiculously cheap” following its financial crisis in the late 1990s, meaning there were “a lot of bargains,” Buffett said.

The investor and his team ultimately cashed out after Samsung’s stock price surged about 80%. A weaker won also boosted their return in dollars.

“We probably made in the hundreds of millions,” Buffett said. “Might have been $500 million, $400 million, I don’t remember exactly,” he added.

The estimated return suggests Berkshire invested about $500 million to $600 million in Samsung.

Buffett’s wager paid off handsomely, but he may have sold too soon. Samsung’s shares have tripled in value since the time of Berkshire’s investment, and now change hands at more than 60,000 won each.

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