Stocks across Asia Pacific fell, under pressure from rising US-China tension and concerns over the timeline for reopening the world’s largest economy after the coronavirus pandemic.
China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 0.3 per cent, while Japan’s Topix index shed 0.2 per cent and Australia’s S&P/ASX 200 fell 0.4 per cent. Hong Kong’s benchmark Hang Seng index was flat.
The broader drop for Asian stocks followed a poor showing on Wall Street, where the S&P 500 snapped a six-day run of gains to close 2.1 per cent lower. The decline came as US deaths from Covid-19 jumped above 76,000 and Anthony Fauci, one of the most senior members of President Donald Trump’s coronavirus task force, warned that ending lockdowns too early could result in “suffering and death” and delay the eventual economic recovery.
Investor sentiment has also been dented by the re-emergence of trade tension between Washington and Beijing. Mr Trump on Tuesday ordered the main federal government pension fund not to invest in Chinese companies, citing the risk of “future sanctions” over that country’s handling of the coronavirus pandemic. The fund manages almost $600bn on behalf of federal employees in the US and the White House said investment in Chinese companies would “expose the retirement funds to significant and unnecessary risk”.
One bright spot in the region was India’s Sensex index, which climbed 2.6 per cent after Narendra Modi, the country’s prime minister, on Tuesday announced a $266bn stimulus package to help the country’s economy recover from its coronavirus-induced lockdown.
Robert Carnell, head of Asia-Pacific research at ING, said markets had been hit by slew of negatives including concerns that the premature reopening of economies still grappling with the pandemic could do more harm than good.
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That pessimism was likely to result in a “more than a one or two-day dip in stocks”, which have been buoyed in recent weeks by hopes of a V-shaped rebound in the global economy. “What really matters is whether or not the equity investor community still has that inherent optimism,” Mr Carnell said.
Futures markets tipped the S&P 500 to open flat on Wall Street later in the day, while London’s flagship FTSE 100 was expected to shed 1.1 per cent.
The recent rally in oil prices also fizzled out on Wednesday. US crude benchmark West Texas Intermediate was down 0.7 per cent at $25.60 a barrel. A day earlier WTI gained almost 7 per cent after the American Petroleum Institute reported that inventories at the key storage facility of Cushing, Oklahoma, had fallen by more than 2m barrels.
Brent crude, the international benchmark, fell 1.5 per cent to $29.53.