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Delta Variant Surge Spreads Air of Pessimism Across Trading Floors
The worry on trading floors saw demand for safe-haven assets including US Treasuries, the yen and gold rise. File photo: AFP.

• Hang Seng and Nikkei drop after Dow Jones dips more than 2% 

• Biden tries to calm inflation fears claiming price rises ‘temporary’

 

Asian equities suffered another day in the red on Tuesday as the fast-spreading Covid Delta variant fuelled concerns over the economic recovery.

Investors have been rattled by recent data showing the highly transmissible virus is surging across the world again, forcing some governments to reimpose containment measures.

But also having an impact on trading floors are lingering worries about possible central bank policy tightening, profit-taking in markets sitting on record or multi-year highs and investors jockeying for position as the corporate earnings season begins.

 

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Bubbling geopolitical tensions were also an influence after the United States accused Beijing of carrying out a massive Microsoft hack and charged four Chinese nationals, condemning its serial “cyber sabotage”.

China has denied the claims as “totally groundless and irresponsible” and “fabricated” by Washington.

“What is likely concerning markets now is that there is also a surge in infections occurring in developed markets with high levels of vaccination,” National Australia Bank’s Tapas Strickland said.

This showed “that fully vaccinated people while being protected from severe cases and hospitalisation, can still transmit the virus”.

 

VIRUS RESTRICTIONS

“Virus restrictions may need to be in place for longer, or even re-introduced, until vaccination rates lift further and full vaccination is available to everyone who wants it,” Strickland added.

Wall Street’s three main indexes all ended deep in the red, with the Dow shedding more than 2% while the Nasdaq and S&P 500 were more than 1% off.

And the selling filtered through to Asia, where Tokyo suffered a fifth straight loss, while Shanghai, Hong Kong, Sydney, Seoul, Mumbai, Bangkok, Wellington and Taipei were also well in retreat.

The Hang Seng Index fell 0.84%, or 230.53 points, to 27,259.25. The benchmark Shanghai Composite Index eased 0.07, or 2.33 points, to 3,536.79, while the Shenzhen Composite Index on China’s second exchange added 0.18%, or 4.43 points, to 2,456.75.

 

SAFE-HAVEN ASSETS

The benchmark Nikkei 225 index dropped 0.96%, or 264.58 points, to 27,388.16, the lowest since early January. The broader Topix index lost 0.96%, or 18.24 points, to 1,888.89.

The worry on trading floors was reflected in demand for safe-haven assets including US Treasuries, the yen and gold. Bitcoin fell to as low as $29,516 and below $30,000 for the first time in a month, having hit a record near $65,000 in April.

“One of the reasons bonds have rallied so much is that institutional investors have rebalanced out of equities, which have had a huge run, into fixed income,” Jim McDonald, of Northern Trust Bank, told Bloomberg Television.

 

FED FEARS

Meanwhile, US President Joe Biden tried to calm worries about inflation, saying the recent spike in prices, which have raised concerns the Federal Reserve will have to hike interest rates, would be “temporary”.

Oil prices rose more than 1% after Monday’s massive losses caused by worries about the impact on demand from spiking Covid cases and after major producers from the OPEC+ grouping agreed to increase output from next month.

Brent tanked 6.8% and WTI lost 7.5%, leaving both contracts sitting at levels not seen for about eight weeks.

 

MARKETS

Tokyo – Nikkei 225: DOWN 1.0% at 27,388.16 (close)

Hong Kong – Hang Seng Index: DOWN 0.8% at 27,259.25 (close)

Shanghai – Composite: DOWN 0.1% at 3,536.79 (close)

New York – Dow: DOWN 2.1% at 33,962.04 (close)

 

  • Reporting by AFP

 

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