Read for 4 minutes SYDNEY, Australia (Reuters) – On Tuesday, Asian stocks fell on concerns 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 an 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 0.11 percent lower, lingering near recent highs. With the ASX/200 index down 0.76 percent and the Nikkei down 0.91 percent, Australian and Japanese stocks suffered the brunt of the early losses. South Korean markets were down 0.39 percent, while Chinese stocks were down 1.06 percent. Fears of the highly infectious Delta virus type spreading have dampened morale at a time when markets are still on edge following the Fed’s surprise hawkish shift earlier this month. 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. “Markets are definitely treading water,” said Ray Attrill, Head of FX Strategy at National Australia Bank in Sydney, “before of the very important U.S. labor data later this week.” “We have a month and quarter end coming up, as well as a financial year end coming up here (Australia) tomorrow, so that’s definitely another reason for markets to be cautious.” 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 Monday, the Nasdaq and S&P 500 indexes rose 0.98 percent and 0.23 percent, respectively, to new highs, fueled by tech stocks as investors banked on 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. Investors will also be watching Tuesday’s consumer confidence data as well as Thursday’s manufacturing index from the Institute for Supply Management for signs on where interest rates are heading. The dollar and the yen have both benefited from safe-haven demand fueled by fears of the Delta virus spreading. The dollar was unchanged versus the euro at $1.192, while it was unchanged against the Japanese yen at 110.46 yen. The yield on the benchmark 10-year U.S. Treasury note remained unchanged at 1.483 percent. Brent crude was trading at $74.43 a barrel, down 0.28 percent. At $72.73 per barrel, U.S. crude was down $0.18, or 0.25 percent. By 01:33 GMT, spot gold was unchanged at $1,777.12 per ounce. Paulina Duran contributed reporting from Sydney, and Shri Navaratnam edited the piece. Continue reading