Asian shares lower, US futures up after S&P 500 sinks 3.5pc

AP – Asian shares declined yesterday and United States (US) futures were higher after the S&P 500 slid 3.5 per cent overnight for its biggest drop since June.

The selling in US markets followed broad declines in Europe, where the French President announced tough measures to slow the virus’ spread and German officials agreed to impose a four-week partial lockdown.

So far, the measures are not as stringent as shutdown orders that swept the world early this year, but the worry is they could still hit the already weakened global economy.

In Asia, some countries appear to be keeping the pandemic in check, while caseloads surge in others. India surpassed eight million confirmed COVID-19 cases, second only to the US, with nearly 8.86 million (see also page 28). Indonesia and the Philippines are struggling to keep outbreaks in check, and fresh clusters of cases are being reported in Japan.

“When it rains, it pours, particularly if you are following today’s COVID-19 headlines,” Edward Moya of Oanda said in a commentary. “An overvalued stock market was ripe for a pullback, but when you focus on COVID-19 headlines, it looks more like panic-selling.”

The Bank of Japan kept its ultra-loose monetary policy unchanged in a policy meeting that ended yesterday. But it downgraded its outlook for the economy, saying that while conditions will eventually improve, “risks to both economic activity and prices are skewed to the downside, mainly due to COVID-19”.

A currency trader walks by the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room in Seoul. PHOTO: AP

Retail sales in Japan, the world’s third largest economy, fell 8.7 per cent from a year earlier in September, according to data reported yesterday. While purchases of goods has recovered somewhat, services remain weak.

The Japanese central bank has been pumping tens of billions of dollars into the economy every year, trying to restore stable growth as the country’s population shrinks and ages. Japan was already in recession when the pandemic began.

In yesterday trading, Hong Kong’s Hang Seng lost 0.7 per cent to 24,530.12 while the Nikkei 225 in Japan fell 0.2 per cent to 23,362.49. In South Korea, the Kospi lost one per cent to 2,320.82, while the Shanghai Composite index recovered from early losses, gaining 0.1 per cent to 3,271.72 ahead of the announcement of a major Communist Party planning document. Australia’s S&P/ASX 200 declined 1.4 per cent to 5,971.10. Shares also fell in Taiwan and Southeast Asia.

The future for the S&P 500 rebounded, gaining one per cent to 3,297.20, while the future contract for the Dow industrials added 1.1 per cent to 26,703.00.

In the US, cases are increasing in just about every state and the number of deaths and hospitalisations due to COVID-19 are on the rise. Even if the most restrictive lockdowns don’t return, investors worry people will limit their spending and activities, hurting businesses.

The US economy could lose momentum just as prospects for more economic support from Washington have dwindled as Tuesday’s Election Day nears.

Uncertainty about the upcoming presidential election has also been pushing markets around.

The S&P 500 lost 119.65 points to 3,271.03. The Dow lost 943.24 points, or 3.4 per cent, to 26,519.95. The Nasdaq composite slumped 3.7 per cent to 11,004.87. The selling was widespread, and 96 per cent of stocks in the S&P 500 fell.

Crude oil wavered between losses and gains. US benchmark crude picked up 11 cents to USD37.50 per barrel in electronic trading on the New York Mercantile Exchange. It tumbled 5.7 per cent on Wednesday on worries that an economy already weakened by the virus would consume even less energy and allow excess supplies to build higher.

Brent crude, the international standard, added four cents to USD39.68 per barrel. It fell 5.4 per cent to USD39.64 per barrel on Wednesday.

A measure of fear in the stock market touched its highest level since June, when the market suddenly tumbled amid concerns that a “second wave” of coronavirus infections had arrived.

The VIX measures how much volatility investors expect from the S&P 500, and it climbed 20.8 per cent on Wednesday.