Asian markets drop again as election jitters set in

HONG KONG (AFP) – Asian markets tumbled yesterday with investors spooked by soaring virus cases in Europe and the United States (US) that have forced fresh lockdowns, while uncertainty ahead of next week’s US election was also dampening sentiment.

Regional traders brushed off a healthy rebound on Wall Street and forecast-beating economic growth data out of Washington with analysts warning that a new infection surge and failure to pass a new stimulus would likely knock the recovery off track.

Equities have had a torrid week as governments are forced to act to contain a second wave of disease in the northern hemisphere, with France essentially shutting down for November, Germany putting tough measures in place and several other countries in danger of having to follow suit.

European Central Bank (ECB) boss Christine Lagarde noted the eurozone was facing a tough few months, saying on Thursday that the economy was “losing momentum more rapidly than expected” after a partial rebound in the summer, adding that risks were “clearly tilted to the downside”.

However, on a positive note she hinted that the bank could unveil fresh measures to keep credit flowing.

Eyes are now on Tuesday’s presidential election, with expectations Joe Biden will win the White House, while Democrats could sweep both houses of Congress, which observers say could see the passage of a huge new stimulus.

A currency trader walks by screens showing the Korea Composite Stock Price Index (KOSPI) and the foreign exchange rate between the US dollar and South Korean won. PHOTO: AP

However, despite Biden being well ahead of US President Donald Trump in national and battleground polls, traders remain nervous that the president could contest any tight result, having spent much of the campaign warning of mail-in voter fraud.

“There is going to be more volatility ahead of the election,” Quincy Krosby of Prudential Financial told Bloomberg TV.

“Over the weekend folks are going to be focussed on (key battleground state) Pennsylvania to see whether or not Biden is gaining there. The concern is if he gains a little bit, that may be one where you could actually look to a contested election,” she added.

Trump on Thursday claimed a triumph with data showing the world’s top economy expanded a record 33.1 per cent in the third quarter, warning in a tweet that Biden would ruin the recovery.

However, analysts pointed out that the figure came after a 31.4 per cent drop in the previous three months and was driven by consumer spending supported by a massive USD3 trillion in government aid, much of which has since expired.

“Even with the sharp rebound seen in the third quarter, the level of gross domestic product (GDP) remains 3.5 per cent below pre-pandemic levels with a large degree of spare capacity remaining,” said National Australia Bank’s Tapas Strickland.

“Higher-frequency data also suggests that growth has slowed over recent months, not helped by the resurgence of COVID-19.”

Separate figures showed new applications for jobless benefits fell last week but remained at a mind-boggling 751,000.

Asian markets extended the week’s losses, with tech firms weighed by warnings from US giants including Apple, Amazon and Facebook that the outlook was murky owing to the impact of the coronavirus.

Hong Kong shed two per cent and Seoul dived 2.6 per cent, while Tokyo and Shanghai were more than one per cent down. There were also big losses in Sydney, Mumbai, Singapore, Bangkok and Wellington.

However, OANDA’s Edward Moya offered a note of hope, saying that while the virus is resurgent, “the world is better prepared to (deal with) COVID-19 over the winter months and hopes are still high that treatments and vaccines will get approvals before year end”.

Oil prices climbed in early trade following another hefty loss on Thursday that sent the commodity to four-month lows, though observers warned that the imposition of new lockdowns and containment measures would keep gains limited and likely spark further selling.