Stocks fall as virus outbreak leaves fans concerned about global recovery

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HONG KONG – Asian stocks extended their losses on Tuesday as investor sentiment cooled further amid growing fears the spreading Delta variant of the coronavirus will harm the global economic recovery, causing risky assets to slide sharply.

However, European and US markets look set to recover with FTSE and E-mini futures for the S&P 500 index up 0.06% and 0.22% respectively.

MSCI rating Asia Pacific stocks outside Japan extended losses to nearly 1%, with Australia’s S&P/ASX 200 down 0.44%.

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Japan’s Nikkei 225 hit a six-month low, down nearly 1%.

China’s removal of risks hit real estate stocks and the broader market for a second day, sending shares of heavily indebted developer China Evergrande Group plummeting. The Hang Seng Index fell 1.16% while China’s benchmark CSI300 index fell 0.53%.

In Beijing, policymakers left the benchmark lending rate unchanged for corporate and household loans at the July fix date on Tuesday, despite growing expectations of a cuts after an unexpected reduction in bank reserve requirements.

“The markets are clearly in risk-off mode,” said Edison Pun, senior market analyst at Saxo Markets.

“Investors are concerned that a new outbreak could hamper the pace of economic reopening. Tai Hui, head of Asia market strategy, JP Morgan Asset Management, said the next 1-2 months will be an important test of governments’ strategies in normalizing life and business activities. economy amid the threat of a pandemic.

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In a separate measure of investor risk appetite, bitcoin fell below $30,000 for the first time since June 22.

Stocks on Wall Street fell as much as 2% on Monday, with the Dow posting its worst day in nine months as the number of COVID-19 deaths rose in the United States.

Riskier assets globally have come under pressure recently as many countries struggle to contain outbreaks of the fast-spreading variant of the Delta virus, raising concerns that account lockdowns and restrictions could affect the economic recovery around the world.

“Despite the rollout of a vaccine, markets do not appear to be learning to live with COVID-19,” ANZ analysts wrote in a note to clients.

“At least for now, sentiment seems to have turned to convincing that growth and earnings expectations may be overdue,” they said, noting that risk-averse investors are dropping out. money to buy goods.

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US yields edged higher on Tuesday after Monday’s stinging rally. The 10-year yield rose to 1.2087% from a close of 1.181%, last seen in February, and the 2-year yield rose to 0.2196% from Tuesday’s 0.21%.

However, while the US yield curve is slightly up, the spread between the US 10-year and 2-year yields remains near the lowest in February, signaling investors doubt about the growth outlook. .

JPMorgan’s Hui said falling US yields reflected lower inflation expectations if the reopening was delayed and potential downside risks to the economy, but value and cyclical sectors would continue to get better over the next 6-12 months due to the ongoing global recovery.

Japan’s core consumer prices rose 0.2% in June from a year earlier, marking the fastest annual rate in more than a year, driven largely by higher energy costs, a sign shows that the impact of global commodity inflation is gradually expanding.

Oil prices steadied after falling about 7% in the previous session amid concerns about future demand and following the OPEC+ supply increase agreement. Brent crude rose 1 cent to $68.63 a barrel by 0412 GMT. The US crude oil contract for August delivery, which expires after Tuesday, rose 15 cents to $66.57 a barrel.

Spot gold rose 0.3 percent to $1,817.28 an ounce by 0:503 GMT, after touching a one-week low of $1,794.06 in the previous session.

(Reporting by Kane Wu in Hong Kong; additional reporting by Andrew Galbraith in Shanghai Editing by Shri Navaratnam and Michael Perry)