- Oil prices extended gains after soaring nearly five percent Tuesday on news that Saudi Arabia had offered to cut output by a million barrels in both February and March.
HONG KONG: Asian markets were mixed Wednesday after a strong start to the year, with the virus and vaccines taking a back seat briefly as focus turned to the US state of Georgia where two senate runoff elections could decide the fate of Joe Biden's legislative programme.
Traders have for months been juggling long-term optimism and short-term worries with hopes high that inoculations will mean life can slowly get back to normal but the immediate surge in Covid cases globally forcing several nations to reimpose lockdowns and other strict containment measures.
And having navigated the major stumbling blocks of Brexit, US stimulus and the presidential elections, eyes are now on the closely fought vote in Georgia, where two tight elections are too close to call.
Dealers are worried that a double win for the Democrats would see them wrest control of the Senate from the Republicans and give them control of Capitol Hill for at least the next two years, allowing Biden to push through measures such as tax hikes and market regulations.
And while it would likely pave the way for a new, huge stimulus, there is a fear that would lead to higher inflation and in turn higher interest rates.
"Democrats would need to win both races to control the Senate and hence both houses, allowing them far more freedom to run larger fiscal packages," said Sebastien Galy, of Nordea Investment.
"A dual win should lead to a steeper (Treasury yield) curve and a weaker dollar as the fiscal situation would be seen as unsustainable."
After a positive lead from Wall Street, where all three main indexes bounced back from their worst start to a year since 2016, Asian markets drifted.
Tokyo, Hong Kong, Sydney, Manila and Wellington were all in the red but Shanghai, Seoul, Singapore, Taipei and Jakarta were slightly higher.
Analysts said that while new restrictions, worrying infection spikes and stuttering vaccine distribution in some countries were jangling nerves on trading floors, traders were keeping their sights on the second half of the year.
"Even if the US has passed peak vaccine rollout euphoria and dreams of the efficient distribution are now replaced with the unfortunate logistical rollout reality, markets will remain focused on the end of the tunnel, regardless of its length," said Axi strategist Stephen Innes.
Oil prices extended gains after soaring nearly five percent Tuesday on news that Saudi Arabia had offered to cut output by a million barrels in both February and March.
The announcement sent WTI above $50 for the first time in 11 months.
The move soothed worries about global demand with new lockdowns, which could last months in some countries, likely to stunt travel again.