Asian markets tumble as infection rates jump

HONG KONG (AFP) - Asian markets sank yesterday as rising virus infection rates across the world put the brakes on the latest rally.

Equities have shown a healthy resilience to the rapid spread of the disease around the world, with hopes for the economic recovery, the easing of lockdowns and government largesse providing 
crucial support.

But several days of figures showing a record number of new cases in populous US states including Florida, Texas and California - leading to the reimposition of containment measures were beginning to sink in.

A lockdown in Australia’s second-biggest city Melbourne and the sprouting of new clusters in Hong Kong, which had gone weeks without any new cases, added to the worry.

Analysts also pointed out that while global markets have enjoyed healthy gains, those have mostly come thanks to traders moving into tech firms, which are more likely to benefit from further lockdowns.

This is reflected in the tech-heavy Nasdaq index on Wall Street hitting multiple record highs over the past week, including Thursday.

The Dow fell more than one percent and the S&P 500 also dropped, with traders unmoved by data showing the number of US workers filing for unemployment benefits last week fell by 99,000.

Analysts warned the figure remained high and the latest re-closures in some states could lead to fresh layoffs.
Asia tracked the New York losses, with profit-taking also playing a part after a broadly strong week.

Hong Kong dived 1.8 percent as a fresh outbreak in the city prompted authorities to reimpose measures including the closure of schools.

Tokyo ended 1.1 percent down and Shanghai, which has been surging over the past week, lost two percent with Bloomberg News reporting that state-backed funds were easing back on their investments to put a brake on the rally.

Sydney slipped 0.6 percent and Seoul shed 0.8 percent while Taipei dropped one percent, with losses also seen in Wellington, Mumbai, Jakarta and Manila.

London, Paris and Frankfurt all fell in early trade.

“Optimism is giving way to de-risking into the weekend as there is no way to sugar-coat, let alone the Fed papering over (with a financial back-stop), the new daily COVID-19 cases,” said Stephen Innes 
at AxiCorp.

And OANDA’s Jeffrey Halley said it was hard to give a confident forecast for the outlook on markets but added that authorities had traders’ backs.

“As to which direction equities, that most schizophrenic of financial markets, are heading next, I know not,” he said in a note.

“In the bigger picture, though, one must keep one’s eyes on the prize: The world’s central banks, via bottomless monetary policy easing, have investors’ backs. The S&P 500 could easily drop 20 percent from these levels and still be in a bull market.”

The risk-off mood hit oil prices and higher-yielding currencies as traders shifted to safer havens such as the yen and dollar.

However, gold -- another go-to asset in times of uncertainty -- was hit by profit-taking after hitting eight-and-a-half-year highs on Thursday.

Investors are also keeping tabs on the US presidential race, with Democratic candidate Joe Biden unveiling a multi-billion-dollar economy and jobs-boosting plan as well as new tax rules including hiking the country’s corporate tax rate to 28 percent from 21 percent.