Asian stocks track Wall Street retreat as COVID caseloads surge

TOKYO (AP) – Asian shares were mostly lower yesterday, echoing pullbacks on Wall Street as worries grow about surging coronavirus cases in the region.

Japan’s benchmark Nikkei 225 edged 0.1 per cent lower in morning trading to 27,232.38, as the government was preparing to declare a state of emergency in Tokyo and several surrounding areas.

Australia’s S&P/ASX 200 slipped 0.2 per cent to 6,669.90. South Korea’s Kospi was little changed, gaining less than 0.1 per cent, at 2,944.98. Hong Kong’s Hang Seng fell nearly 0.1 per cent to 27,448.20, while the Shanghai Composite dipped 0.1 per cent to 3,498.65.

Japan’s prime minister has said the government is considering declaring a state of emergency to help curb the spread of infections. The move is expected this week. Tokyo Governor Yuriko Koike and the governors of Saitama, Chiba and Kanagawa asked the national government over the weekend to declare the emergency after the capital saw a daily record of 1,337 cases on New Year’s Eve.

US stocks pulled back from their recent record highs, as big swings return to Wall Street at the onset of a year where the dominant expectation is for a powerful economic rebound to sweep the world.

“With the seven-day average new cases still hanging in the 600 K zone globally, few are likely expecting the market to be spared the resurgence of COVID-19 fears,” said Senior Market Strategist Jingyi Pan at IG in Singapore.

“Certainly, with the amalgamation of factors ranging from the UK’s third nationwide lockdown announcement, US hospitalisations surging to a record and Tokyo mulling a state of emergency, these had all been evidence of the still raging pandemic inducing the risk-off mood to start the year for US indices,” Pan said.

The S&P 500, which ended 2020 at an all-time high, slid 1.5 per cent after earlier dropping as much as 2.5 per cent. It was the benchmark index’s biggest decline since late October.

Technology companies accounted for a big share of the sell-off, along with industrial, communication services, health care and other stocks. Only the S&P 500’s energy sector managed to eked out a gain.

The selling comes as coronavirus cases keep climbing at frightening rates around the world, threatening to bring more lockdown orders that would punish the economy. The worsening numbers also raise the possibility that Wall Street has been overly optimistic about the big economic recovery it sees coming because of COVID-19 vaccines. Yesterday’s upcoming runoff elections to determine which party controls the Senate may also be contributing to the volatility.