Asia stocks drop as virus spikes, China data unable to lift gloom
Hong Kong (AFP) – Asian markets fell Thursday as investors fretted over fresh spikes in virus infections around the world and the reimposition of lockdowns, while forecast-busting economic growth data out of China was unable to break through the unease on trading floors.
While markets have been rallying since hitting their low points in March — thanks to government support and the easing of lockdowns — traders have had to juggle hopes for economic recovery with the reality of a deadly virus that is sweeping the globe.
Geopolitical tensions, particularly between China and the United States, were also fanning uncertainty.
Beijing said the world’s top economy expanded 3.2 percent in the second quarter, much better than the 1.3 percent tipped in an AFP poll of economists, indicating China is well on the road to recovery after months of lockdowns that caused a first-quarter contraction.
However, while the reading was welcomed, analysts said investors had largely priced in a recovery and pointed to a worse-than-expected drop in retail sales in June — a small rise had been forecast — suggesting consumers are still reluctant to spend.
The retail sector has taken on an increasingly significant role in China’s economy as leaders look for consumers, rather than trade and investment, to drive growth.
“No matter how much stimulus and fiscal sugar you try to entice consumers with, they will not leave their apartment and go on a spending spree until they feel confident the landscape is virus-free,” said AxiCorp’s Stephen Innes.
Shanghai and Hong Kong went into the break more than one percent down, while Tokyo lost 0.8 percent in the afternoon and Sydney shed 0.9 percent.
Seoul gave up 0.6 percent, while Singapore, Taipei and Wellington were also down. There were gains in Mumbai, Manila, Jakarta and Bangkok.
– ‘Not out of the woods’ –
Investors are growing increasingly worried about a surge in infections in several countries that had been reopening their economies confident they had controlled or tempered their outbreaks.
California has reimposed containment measures including closing bars and restaurants in the richest US state, while others have followed similar measures.
Elsewhere, the easing of lockdown restrictions seen as key to kick-starting economic recoveries were being reversed or put on hold, such as in Hong Kong, Australia, Japan and India.
On Thursday the head of the International Monetary Fund warned that the world economy was “not out of the woods”, despite signs of improvement, with challenges including a possible second wave of infection.
Kristalina Georgieva said in a blog post that the $11 trillion in stimulus provided by G20 nations helped to prevent a worse outcome, but “these safety nets must be maintained as needed and, in some cases, expanded”.
Despite some signs of recovery, the global economy faces continued challenges, including the possibility of a second wave of COVID-19, and governments should keep their support programmes in place, IMF chief Kristalina Georgieva said Thursday.
Oil markets dropped after rallying more than two percent Wednesday on signs of a huge drawdown in US inventories, which boosted demand hopes.
Investors were also looking to an expected pick-up in output from major producers, who have embarked on a massive output cut since earlier this year to fight a global glut that sent prices crashing below zero.
However, the OPEC+ grouping expects the increase in oil will be offset by improving demand and compensatory reductions by countries that had not made big enough cuts previously.
– Key figures around 0430 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 22,773.24
Hong Kong – Hang Seng: DOWN 1.2 percent at 25,183.08 (break)
Shanghai – Composite: DOWN 1.4 percent at 3,314.03 (break)
West Texas Intermediate: DOWN 0.7 percent at $40.92 per barrel
Brent North Sea crude: DOWN 0.6 percent at $43.55 per barrel
Euro/dollar: DOWN at $1.1405 from $1.1410 at 2100 GMT
Dollar/yen: UP at 106.95 yen from 106.92 yen
Pound/dollar: DOWN at $1.2558 from $1.2589
Euro/pound: UP at 90.83 pence from 90.62 yen
New York – Dow: UP 0.9 percent at 26,870.10 (close)
London – FTSE 100: UP 1.8 percent at 6,292.65 (close)
Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.
