Equities in much of the Asia-Pacific region fell following a sharp drop on Wall Street spurred by a record surge in new US coronavirus cases and the failure to agree on a new stimulus deal.
Japan’s Topix index fell 0.2 per cent on Tuesday, Australia’s S&P/ASX 200 dropped 1.7 per cent and Hong Kong’s Hang Seng was down 0.9 per cent.
On Wall Street overnight, the S&P 500 fell as much as 2.9 per cent before paring losses to close down 1.9 per cent, marking its biggest daily loss in more than a month as coronavirus case numbers in the US rose sharply.
In Europe, Germany’s Dax index tumbled 3.7 per cent and the broader Stoxx 600 fell 1.8 per cent, as worries grew over the impact of new lockdown measures across the continent.
The partial recovery in US stocks came after Nancy Pelosi, the Democratic speaker of the House of Representatives, expressed optimism about reaching a deal with Republican lawmakers and the White House on a stimulus package. The negotiations are to renew expanded jobless benefits that expired at the end of July.
Tai Hui, chief Asia market strategist at JPMorgan Asset Management, said markets would be quick to react to any sign of progress in the talks over a stimulus deal. But “the potential optimism around a deal could be damped as we approach election day. The recent surge in infections in the US and Europe is also denting market sentiment”, he added.
Futures pointed to a slight recovery when Wall Street opens on Tuesday, with the S&P 500 tipped to rise 0.2 per cent, while the FTSE 100 was expected to open flat and European shares were set to gain 0.1 per cent. Futures trading during Asian hours is often thin, which can increase volatility.
China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.1 per cent as onshore investors looked ahead to the latest five-year policy plan being thrashed out in Beijing. The Fifth Plenum, a meeting of the Communist party leadership, runs until Thursday and will determine the priorities for the country in the coming years.
Mr Hui said the latest plan was likely to advocate for greater self-reliance in essential technologies including semiconductor development. But “China still needs to keep its market open to the rest of the world, since it is unrealistic to have a fully closed supply chain”, he added.
Oil prices were slightly higher with Brent crude, the international benchmark, up 0.7 per cent at $40.76 a barrel.