Chinese equities support Asia; markets wary of virus spike, US presidential debate

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SYDNEY (Reuters) – Chinese stocks pushed Asian markets higher on Monday, even though sentiment was still cautious ahead of a US presidential debate and as a spike in new coronavirus cases sapped hopes for a global economic recovery.

FILE PHOTO: People wearing protective masks, following the coronavirus (COVID-19) outbreak, are reflected on a screen showing stock prices outside a brokerage house in Tokyo, Japan on 31st August 2020. REUTERS / Kim Kyung-Hoon / File photo

The largest MSCI index of Asia-Pacific stocks outside of Japan rose 0.5% to 550.47, but still within reach of a two-month low of 543.66 reached last week.

The index is expected to end the month in the red after three straight monthly gains as the pandemic continues to wreak economic havoc around the world and sparks investor concern over sky-high valuations.

Chinese stocks opened higher and helped support Asian markets after a tentative start, with the blue-chip CSI 300 index rising 0.85%. Shanghai’s ESS climbed 0.5%.

Encouragingly, data over the weekend showed Chinese industrial company profits rose for the fourth consecutive month in August, in part thanks to a rebound in prices for raw materials and equipment manufacturing.

Elsewhere, Japan’s Nikkei rose 0.75%, partly on a lower yen, while South Korea’s KOSPI index rose 1.1%.

Australia’s main equity index reversed early losses to rise slightly, thanks to positive news on the coronavirus front with new infections in the country’s second most populous state, Victoria, and allowing authorities to alleviate some mobility restrictions.

The large gains in Asia follow a Wall Street rally on Friday, although analysts expect the gains to be short-lived as expectations for economic growth begin to weaken.

Of particular concern is the resurgence of COVID-19 cases in Europe, stifling earlier hopes that authorities could have begun to exercise some control over the outbreak and increasing pressure on businesses already struggling with losses.

“Clouds have started to gather in the developed world as political uncertainty grows in the United States and Europe grappling with a resurgence of COVID-19 cases”, Kerry Craig, Global Market Strategist, JP Morgan Asset Management.

COVID-19 cases are approaching 33 million globally, with 992,470 dead, as Europe has seen an increase in new infections.

“While governments are reluctant to reintroduce nationwide lockdowns, local and sectoral restrictions can last for some time, restricting economic activity,” added Craig.

Investors will then focus on the first debate between US President Donald Trump and his rival Joe Biden on Tuesday before the November election.

A strong performance in Tuesday’s debate by Biden, who currently has a modest lead in betting and polls, could boost global trade and renewables-related stocks, while a perceived victory by Trump could benefit businesses from fossil fuels and defense.

There will also be a focus on the progress of a new US tax support program, while investors will closely follow the UK-Europe post-Brexit trade negotiations as they unfold. ‘they continue this week.

In currencies, the dollar rose from a nearly two-week high against the Japanese yen at 105.44.

The euro was last at $ 1.1628, not far from a two-month low of $ 0.1611 hit on Friday.

The British pound rose 0.1% to $ 1.2760.

The risk-sensitive Australian dollar was slightly firmer at $ 0.7052 after falling for six straight sessions as the odds narrowed on the prospect of further easing of monetary policy in the country.

In commodities, oil prices have come under pressure as further restrictions on mobility in various countries to contain a resurgence of coronavirus cases cloud the outlook for fuel demand to recover.

US Brent crude slipped 18 cents to $ 41.74 a barrel while US light crude fell 19 cents to $ 40.06.

Gold was a shade higher at $ 1,861.8, still far from an all-time high above $ 2,000 per ounce hit in August.

Edited by Shri Navaratnam

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