Equities sink after Wall St drop as new virus cases spike

HONG KONG (AFP) – Asian equity markets fell yesterday after a surge in coronavirus infections in several countries, including the United States (US), prompted officials to re-impose containment measures that have fanned worries about the economic recovery.

After weeks of lockdown easing across the planet, there are signs of a second wave of infections in key cities, jolting the investor confidence that has helped power a surge in equities from their March trough.

Bars in Los Angeles and six other counties in California – with a joint population of more than 13 million people – were ordered to close up again, just over a week after reopening, while San Francisco is stalling its easing measures.

There has also been a sharp pick-up in Texas and Florida, two of the most populous American states and home to a combined 50 million people.

Other big states including Arizona and Georgia have also seen large jumps in cases.

A man looks at an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo. PHOTO: AP

“This is a very, very serious situation and the window is closing for us to take action and get this under control,” said Health and Human Services Secretary Alex Azar.

Stephen Innes at AxiCorp warned that increased mobility as parts of the country returned to business had likely led to the recent rise in coronavirus infections.

That had in turn caused “a reversal of mobility trends and a reduction in economic activity, particularly in the hardest-hit states,” he said.

OANDA’s Jeffrey Halley added that the trajectory of new infections in the US was still a “primary concern” for investors.

“As the consumer of last resort for the rest of the world for so long, an aggressive double-dip in the US economic recovery will surely see the rest of the world catch a cold,” Halley said.

The issue is not confined to the US.

China has imposed a strict lockdown on nearly half a million people in a province surrounding Beijing to contain a fresh cluster, with a city official calling the situation “severe and complicated”.

Asian markets tracked steep losses in New York last Friday.

Tokyo lost more than two per cent and Seoul was 1.9 per cent off, while Sydney, Mumbai, Manila and Singapore lost more than one per cent each.

Hong Kong sank one per cent as investors there keep a nervous eye on this week’s July 1 China handover anniversary, fearful of fresh protests.

Shanghai finished 0.6 per cent lower, with little solace in upbeat weekend data showing profits at Chinese industrial firms rose last month for the first time since November.

There were also losses in Jakarta and Bangkok, while London and Paris were slightly higher and Frankfurt gained 0.5 per cent.

“Equity market consolidation is broadly in line with our thinking that equities were getting ahead of economic fundamentals,” said Tai Hui, a strategist at JP Morgan Asset Management.

“The rebound of the infection rate, especially in the US, shows that the road to full recovery is going to be long,” he added.

Concerns about the impact on demand from the re-imposition of some containment measures weighed on oil markets, with both main contracts down more than one per cent, having lost around three per cent last week.

And analysts said the commodity would have suffered heavier losses were it not for massive output cuts by major producers.