Stocks weaken as virus outbreaks fuel fears of global recovery

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HONG KONG, July 20 (Reuters) – Asian stocks widened their losses on Tuesday as investor confidence weakened further amid growing fears that the spread of the Delta variant of the coronavirus could hurt the global economic recovery, causing skidding riskier assets.

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

The MSCI gauge of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) widened losses to nearly 1%, with the Australian S & P / ASX 200 (.AXJO) down 0.44%.

Japan’s Nikkei 225 (.N225) hit a six-month low, down nearly 1%.

China’s deleveraging risks hurt real estate stocks and the broader market for a second day, causing shares of heavily leveraged developer China Evergrande Group (3333.HK) to fall. The Hang Seng Index (.HSI) plunged 1.16% while the Chinese benchmark CSI300 (.CSI300) slipped 0.53%.

In Beijing, policymakers kept the key rate on business and household loans unchanged when it was set in July on Tuesday, despite rising expectations of a cut after a surprise drop in bank reserve requirements.

“The markets are clearly in risk mode,” said Edison Pun, senior market analyst at Saxo Markets, adding that Wall Street’s uptrend is weakening.

“Investors fear that a new epidemic could potentially hamper the pace of economic reopening. The next 1-2 months will be an important litmus test on governments’ strategy to normalize life and economic activity amid the threat of economic growth. pandemic, ”Tai Hui said. , Chief Asian Markets Strategist, JP Morgan Asset Management.

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

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

The riskiest assets globally have come under pressure recently as many countries struggle to contain the outbreak of the fast-spreading Delta virus variant, raising fears that further lockdowns and other restrictions will upend the crisis. global economic recovery.

“Despite the vaccine rollout, markets don’t seem to be learning to live with COVID-19,” ANZ analysts wrote in a note to customers.

“Sentiment appears to have shifted, at least for now, to a belief that growth and earnings expectations may be exaggerated,” they said, noting that risk-averse investors were bailing out commodities.

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

However, as the US yield curve steepened slightly, the spread between US 10-year and 2-year yields remained close to February lows, signaling investor doubts about growth prospects.

JPMorgan’s Hui said the fall in US yields reflects lower inflation expectations if the reopening is delayed and a potential downside risk to the economy, but that the value and cyclical sectors should continue to outperform over the course of the year. the next 6 to 12 months given the ongoing global recovery.

Japan’s consumer staples prices rose 0.2% in June from a year earlier to mark the fastest annual pace in more than a year, mainly due to rising costs of l energy, a sign that the impact of global commodity inflation has gradually widened. Read more

Oil prices have stabilized after falling around 7% in the previous session amid concerns about future demand and after an OPEC + deal to increase supply. Brent crude rose 1 cent to $ 68.63 a barrel at 4:12 am GMT. The US crude contract for August delivery, which expires later on Tuesday, rose 15 cents to $ 66.57 a barrel. Read more

Spot gold rose 0.3% to $ 1,817.28 an ounce at 5:03 am GMT, after hitting a one-week low at $ 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

Our Standards: Thomson Reuters Trust Principles.



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