Asian stocks tumble after Covid-19 surge in US pushes down Wall Street

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Shares in much of the Asia-Pacific region fell on the back of a sharp drop on Wall Street, spurred by a record rise in new coronavirus cases in the United States and the inability to agree on a new stimulus agreement.

Japan’s Topix benchmark fell 0.3% on Tuesday, Australia’s S & P / ASX 200 fell 1.6%, and Hong Kong’s Hang Seng fell 0.4% in morning exchanges.

On Wall Street overnight, the S&P 500 fell 2.9% before cutting losses to close 1.9%, marking its largest daily loss in more than a month as the number of cases of coronavirus in the United States was increasing sharply.

In Europe, the German benchmark Dax fell 3.7% and the larger Stoxx 600 fell 1.8% as concerns grew over the impact of new foreclosure measures across the continent.

The partial rally in U.S. stocks came after Nancy Pelosi, the Democratic Speaker of the House of Representatives, expressed optimism that a deal could be reached with Republican lawmakers and the White House on a stimulus package. Negotiations aim to renew expanded unemployment benefits which expired at the end of July.

Tai Hui, chief Asian market strategist at JPMorgan Asset Management, said markets will react quickly to any sign of progress in negotiations on a stimulus deal. But “the potential optimism around a deal may be toned down as election day approaches. The recent spike in infections in the United States and Europe is also hurting market confidence, ”he added.

Futures indicated a slight rally at the Wall Street open on Tuesday, with the S&P 500 expected to rise 0.2%. Trading in futures during Asian hours is often thin and can increase volatility.

China’s CSI 300 index of shares listed in Shanghai and Shenzhen rose 0.3% in morning trading as onshore investors anticipated Beijing’s latest five-year policy plan. The Fifth Plenum, a meeting of Communist Party leaders, will continue until Thursday and determine the country’s priorities for the years to come.

Hui said the latest plan is likely to call for greater self-sufficiency in critical technologies, including semiconductor development. But “China must always keep its market open to the rest of the world, because it is unrealistic to have a fully closed supply chain,” he added.

The shock in the stock markets supported government bond prices, pushing yields on 10-year US Treasuries by 0.01 percentage point to 0.796%. Oil prices were slightly higher with Brent, the international benchmark, rising 0.3% to $ 40.56 per barrel.

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