Bargain-buyers joined their US and European counterparts on Wednesday to fuel a rebound in most Asian markets following two days of selling, though optimism over the global economy and concerns about the fast-spreading Delta variant continue to cause volatility.

Investor confidence – built on months of vaccinations, and vast government and central bank support – has been knocked in recent weeks by surging infections around the world that have forced new lockdowns and containment measures while putting the global recovery at risk. That has culminated in big losses for equity markets, which have been sitting at record or all-time highs, as dealers shifted into havens such as Treasuries, gold and the yen.

Blame has largely fallen on the highly transmissible Delta variant, which has spread like wildfire through countries, including those with high vaccination rates. But the main worry is for those that are struggling to inoculate their populations fast enough. And the head of the World Health Organization warned on Wednesday that the pandemic was “a test the world is failing”.

However, analysts said that while the near-term picture was bleak, sights were set on the recovery outlook and that market losses were to be expected. “We had a dip, we had a shock, there is fear of the Delta variant and there is the other side – which is some day we get beyond COVID and when we do, we have a worldwide recovery,” David Kotok, of Cumberland Advisors, told Bloomberg Television. “We are seeing that tension going on in the markets for the last few days.”

We had a dip, we had a shock, there is fear of the Delta variant and there is the other side – which is some day we get beyond COVID and when we do, we have a worldwide recovery- David Kotok of Cumberland Advisors

All three main indexes on Wall Street closed up more than one per cent on Tuesday, clawing back much of the previous day’s hefty losses, with OANDA’s Edward Moya saying “the theme of recurring fresh record highs will eventually continue once this latest wave COVID concerns ease”. 

But Asia struggled to make as much progress. Tokyo, Shanghai, Sydney, Singapore, Wellington, Taipei and Jakarta all rose but Hong Kong, Seoul and Manila extended their losses.

Oil prices retreated on demand fears stoked by the rising infection rates, while reports that US inventories saw a surprise increase last week added to the malaise in the market. That has coupled with news this week that OPEC and other major producers had finally agreed to lift output to address warnings that there could be a supply crisis caused by the economic recovery and people returning to their daily lives.