WORLDWIDE: HEADLINES 

Japan Jan Factory Growth Hits 4-year High, But Services Contract-flash PMI 

Japan’s factory activity grew at the fastest pace in four years in January as output growth picked up, though pressure from a persistent chip shortage, rising input prices and the coronavirus pandemic clouded the outlook. 

However, activity in the private sector as a whole slipped into contraction for the first time in four months as a surge in Omicron variant coronavirus cases hurt customer-facing businesses in the services industry. 

The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 54.6 from the prior month’s final of 54.3 to mark the fastest pace of expansion since January 2018. 

Manufacturers reported the fastest increase in output prices since July 2008, suggesting firms were increasingly passing on higher input costs, which continued to rapidly rise. 

Output and new order growth quickened after momentum fade somewhat in the previous month. 

But worries about the Omicron variant amid a record surge in new coronavirus infections and a reintroduction of COVID-19 curbs in parts of the country greatly hurt activity in the services sector. 

The au Jibun Ban Flash Services PMI Index slumped to a seasonally adjusted 46.6 from December’s final 52.1 to contract at the fastest pace in five months. 

The rate of job shedding in the sector quickened for the second consecutive month to reach its fastest since May 2020, the survey showed. 

Full coverage: REUTERS 

Hong Kong’s Financial Sector Faces Talent Crunch As Expats Head For The Exit 

Late last year, Tania Sibree quit her well-paid job as a financial services lawyer in Hong Kong and returned to Australia rather than live a moment longer with the city’s strict coronavirus restrictions. 

Sibree, who said she had enjoyed the previous five years in Hong Kong, is one of hundreds – possibly thousands – of foreign expatriate professionals who have left or are planning to leave, threatening to dent the city’s standing as one of the world’s financial hubs. 

“The hotel quarantine made it just so tough for people to travel and that was the big incentive to being in Hong Kong, it was close to home and my parents. But you cannot do that long in hotel quarantine with kids,” she said. “Everyone had been thinking the restrictions would be lifted, it would get better and it would not go on for so long.” 

Hong Kong has only had about 13,000 coronavirus infections out of a population of 7.4 million, much lower than most places in the world. But the Chinese territory is following Beijing’s “zero-COVID” policy rather than adapting to life with the virus. 

It has had stiff quarantines in place for two years, and last year introduced some of the strictest entry rules in the world, allowing only residents to return to the city and mandatory hotel quarantine of up to three weeks for arrivals from most countries, regardless of vaccination status, paid for by the travellers themselves. 

However, “zero COVID” is no closer – 140 new infections were reported in Hong Kong on Sunday – and there are no signs of the government easing those restrictions. As a result, more expats are thinking of leaving, and global banks, asset managers and corporate law firms are facing up to many of their staff exiting after annual bonuses are paid out in the first three months of the year, headhunters and industry executives told Reuters. 

Full coverage: REUTERS 

WORLDWIDE: FINANCE/MARKETS 

Asia Shares Tense As Fed Looms, Ukraine A Concern 

Asian share markets slipped on Monday with the Federal Reserve expected to confirm it will soon start draining the massive liquidity that has fuelled the huge gains in growth stocks in recent years. 

Adding to the caution was concerns about a possible Russian attack on Ukraine with the U.S. State Department pulling out family members of its embassy staff in Kyiv. 

The New York Times reported President Joe Biden was considering sending thousands of U.S. troops to NATO allies in Europe along with warships and aircraft. 

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1% and Japan’s Nikkei (.N225) 1.0%. However, Wall Street futures were trying to bounce after last week’s drubbing, with the S&P 500 futures up 0.4% and Nasdaq futures 0.7%. 

Edgy markets are now even pricing in a small chance the Fed hikes rates this week, though the overwhelming expectation is for a first move to 0.25% in March and three more to 1.0% by year end. 

“With inflation eye-wateringly high, the Fed is on course to steadily remove the ultra-accommodative monetary policy that has been a key prop to stock prices for over a decade now,” said Oliver Allen, a market economist at Capital Economics. 

The prospect of higher borrowing costs and more attractive bond yields took a toll on tech stocks with their lofty valuations, leaving the Nasdaq down 12% so far this year and the S&P 500 nearly 8%. 

The rout was exacerbated by a slide in Netflix , which tumbled almost 22%, shedding $44 billion in market value. 

Full coverage: REUTERS 

Oil Prices Climb 1% On Fears Of Tighter Supply 

Oil prices jumped on Monday as geopolitical tensions in Eastern Europe and the Middle East heightened concerns about an already tight supply outlook, while OPEC and its allies continued to struggle to raise their output. 

Brent crude futures rose 87 cents, or 1.0%, to $88.76 a barrel by 0100 GMT, reversing a 0.6% loss on Friday. 

U.S. West Texas Intermediate (WTI) crude futures gained 86 cents, or 1.0%, to $86.00 a barrel, having fallen 0.5% on Friday. 

Both crude benchmarks rose for a fifth week in a row last week, gaining around 2% to hit their highest since October 2014. Prices are up more than 10% so far this year already on the concerns over tightening supplies. 

“Investors remained bullish due to geopolitical risk between Russian and Ukraine as well as in the Middle East while OPEC+ continued to fail to reach its output target,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd. 

“An expectation for higher heating oil demand in the United States amid cold weather also added to pressure,” he said. 

Fuelling fears of supply disruption in Eastern Europe, the United States on Sunday said it was ordering the departure of eligible family members of staff from its embassy in Ukraine and said all citizens should consider leaving due to the threat of military action from Russia. 

The latter will face severe economic sanctions if it installs a puppet regime in Ukraine, a senior British government minister said on Sunday, after Britain accused the Kremlin of seeking to place a pro-Russian leader in power there. 

Full coverage: REUTERS