Read for 5 minutes SYDNEY, Australia (Reuters) – On Tuesday, Asian stocks fell on fears that new coronavirus outbreaks in the region could jeopardize the region’s economic recovery, even as the Federal Reserve considers a faster exit from its accommodating policy due to strong momentum in the US. On February 28, 2020, a guy wearing a face mask is seen inside the Shanghai Stock Exchange building in the Pudong financial district in Shanghai, China, as the country is rocked by a unique coronavirus outbreak. Aly Song/FILES/REUTERS Although momentum has stopped as several countries re-impose lockdowns to restrict the spread of the Delta virus version, MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.15 percent lower, lingering near recent highs. The Nikkei and the ASX/200 indexes both fell 0.91 percent and 0.37 percent, respectively, while the South Korean market fell 0.71 percent. Chinese stocks were also down 0.95 percent as investors took profits following a rise fueled by the country’s remarkable recovery from the COVID-19 outbreak, with financial and consumer goods companies leading the retreat. Fears of the highly infectious Delta virus type spreading are dampening sentiment at a time when markets are jittery following the Fed’s surprise hawkish stance earlier this month. Markets were in a “wait and see” mindset ahead of the June jobs report in the United States, according to Citigroup analysts. EuroSTOXX 50 futures were 0.09 percent higher, while FTSE futures were 0.01 percent down, after European equities were dragged down on Monday by Hong Kong’s announcement that it will prohibit passenger flights from the UK due to an outbreak of diseases in California. The S&P 500 e-minis, or U.S. stock futures, were also down 0.11 percent. Snap lockdowns have been imposed in numerous Australian cities to combat small but rapidly spreading outbreaks, while Indonesia is also dealing with record-high cases, Malaysia is likely to extend a lockdown, and Thailand has announced more restrictions. “In absolute terms, US growth will continue to be quite strong,” said Ray Attrill, Head of FX Strategy at National Australia Bank in Sydney. “However, the outbreaks of the Delta strain are causing some reasons for a little bit of doubt on that view, I believe,” he said. On Friday, the US jobs report for June will be issued, which might impact the Fed’s policy outlook and push interest rate hike forecasts forward. “Because inflation is already far higher than the Fed expected, the rate of improvement in the labor market stands head and shoulders above every other indication in terms of when the Fed will feel comfortable signaling the start of tapering,” Attrill said. Overnight, news of a possible bipartisan infrastructure spending agreement in the United States helped to bolster risk appetite. On Wall Street, the Nasdaq and S&P 500 indexes rose 0.98 percent and 0.23 percent, respectively, to new all-time highs on Monday, fueled by tech companies and expectations for a strong earnings season. Facebook Inc, Netflix Inc, Twitter Inc, and Nvidia Corp were among the top gainers, helping the S&P 500 maintain its momentum after posting its best weekly performance in 20 weeks on Friday. The Dow Jones Industrial Average, on the other hand, declined 0.44, and cyclical sectors fell strongly on concerns over an increase of COVID-19 cases across Asia. The dollar remained virtually unchanged in currency markets as investors remained cautious ahead of Friday’s jobs report. The dollar index was trading at 91.963, up 0.9 percent. Investors will also be watching consumer confidence data from the United States later on Tuesday and the manufacturing index from the Institute for Supply Management on Thursday for hints on where interest rates are headed. The dollar and the yen have both benefited from safe-haven demand fueled by fears of the Delta virus spreading. The euro was at $1.1912, creeping back toward the two-and-a-half-month low of $1.8470 hit on June 18, while the dollar was steady at 110.46 yen against the Japanese yen. The benchmark 10-year U.S. Treasury yield remained unchanged at 1.481 percent. Concerns over the virus’s spread also weighed on oil prices, which fell for a second day as investors fretted about slower growth in fuel demand. Brent crude down 0.47 percent to $74.33 per barrel, while light crude in the United States fell 0.41 percent to $74.61 per barrel. By 05:24 GMT, spot gold was unchanged at $1,777.05 per ounce. [GOL/] Paulina Duran contributed reporting from Sydney, and Shri Navaratnam edited the piece. Continue reading
