Asian markets extended losses on Wednesday with renewed virus and vaccine fears returning to haunt investors as Europe faces fresh infection spikes and lockdowns that could knock the economic recovery off course.
After several weeks of worrying that an expected resurgence in global growth will fan inflation and force central banks to hike interest rates, the fear of another COVID-19 wave has returned.
Europe’s two biggest economies, Germany and France, as well as a number of other countries have been forced to reimpose new restrictions to battle the disease, at the same time as they struggle to get their vaccination programmes rolling properly.
“COVID-19 cases continue to resurge in continental Europe, so their double-dip recession persists as they continue to argue about vaccinations and why they are lagging behind the US and Britain in vaccination rates,” said markets strategist Louis Navellier.
COVID-19 cases continue to resurge in continental Europe, so their double-dip recession persists as they continue to argue about vaccinations and why they are lagging behind the US and Britain in vaccination rates- Louis Navellier, markets strategist
Hong Kong was among the biggest losers, dropping more than two per cent after news that the government had suspended its Pfizer/BioNTech vaccine programme over concerns about packaging, dealing a blow to the city’s already slow inoculation programme. Nearby Macau also halted those jabs.
Airlines and property firms were among the worst-hit as they stand most to lose from a delay to the city’s economic recovery. Fosun Pharmaceutical, the Chinese firm distributing the shot in China, slipped five per cent.
Tokyo shed two per cent, while Shanghai, Mumbai and Jakarta each lost more than one per cent, with Seoul, Singapore, Taipei, Bangkok and Wellington also well in the red. Sydney and Manila rose, however.
“Concerns regarding the strength of the post-pandemic recovery with cases remaining elevated in many jurisdictions and fresh mobility restrictions continue to rock the boat,” said Axi strategist Stephen Innes. “The pattern, in general, has been for the markets to pare back on initial lockdown announcements but then to recover, though there are worries at the moment about a lagged rise in US COVID cases to follow Europe’s.”
Uneven vaccine rollouts
US Treasury yields were lower as investors sought out the safe haven – yields go in the opposite direction to prices – providing respite from a recent increase that had led to worries about a hike in interest rates from the record lows that have supported a year-long equity rally.
Federal Reserve boss Jerome Powell and Treasury Secretary Janet Yellen on Tuesday reiterated their view that while inflation is expected to spike as the economy recovers, it will not likely remain elevated and if it does, they would be at hand to tame it.
Yellen also indicated President Joe Biden was willing to hike corporate taxes to pay for his administration’s priorities, including a huge infrastructure package that he says will create jobs and fight climate change. “Unsurprisingly, it did not sit well with financial markets,” said OANDA’s Jeffrey Halley.
The head of the World Health Organisation warned that the uneven rollout of vaccines around the world, with many poor countries struggling to get access to jabs, could impede the rebound in the world economy.
“As long as the virus continues to circulate anywhere, people will continue to die, trade and travel will continue to be disrupted and the economic recovery will be further delayed,” Tedros Adhanom Ghebreyesus said during a virtual event hosted by the World Trade Organisation.
Oil prices rose after plunging almost seven per cent Tuesday on demand fears sparked by Europe’s fresh virus and vaccine troubles.