Asia: Markets drop on virus, vaccine worries

[HONG KONG] Asian markets extended a global sell-off on Wednesday as virus concerns returned to the fore with several countries reimposing lockdown measures to fight a surge in new infections and the halting of two trials denting hopes for a vaccine or treatment being developed anytime soon.

Analysts said investors had also by now priced in any expectations for Democratic sweep of the White House and Congress in next month's elections that many expect will see a ramped-up new stimulus for the beleaguered US economy.

Traders are also keeping tabs on a speech by Xi Jinping later in the day that reports have suggested will see him announce fresh moves to open up the Chinese economy and boost investment in the Shenzhen-Hong Kong region.

Fears for the economic recovery have mounted in recent weeks because of a Covid-19 resurgence, particularly in Europe where governments are resorting to new controls while trying to avoid the devastating nationwide lockdowns of March and April.

But the Netherlands is set to go into "partial lockdown" later Wednesday, with all bars, cafes and restaurants to close for at least two weeks, while France is expected to announce tighter restrictions and faster testing that some media speculated could see evening curfews in Paris.

And in Britain, Prime Minister Boris Johnson, whose country has the highest death toll in Europe, on Monday ordered pubs in Liverpool to shut as part of a new strategy, while others face fresh containment measures.

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The moves come as Johnson & Johnson said it had temporarily halted its vaccine trial after a participant fell sick, which was followed by news that Eli Lilly had also paused testing of an antibody treatment out of safety concerns.

"Anxiety over second-wave resurgence of Covid-19, which is now apparent in many major economies, is... clouding the view where the question remains how activity curtailment measures feed through into economic and mobility activity," said Axi strategist Stephen Innes.

"And on that front, risk has also deteriorated as participants mulled the implications of another vaccine trial setback."

STIMULUS SAGA DRAGS ON

All three main indexes on Wall Street fell and Asia followed suit.

Shanghai dropped 0.4 per cent and Hong Kong retreated 0.3 per cent as investors in the city returned from a day off forced by a typhoon, while Tokyo eased 0.1 per cent.

Sydney, Seoul, Taipei and Manila all dropped. Singapore shed 0.5 per cent after data showed the city-state's economy contracted seven percent in the third quarter.

Still, Wellington and Jakarta edged up.

The chances of a new US stimulus dimmed further after House Speaker Nancy Pelosi immediately rejected a Republican offer to pass targeted measures for small businesses, while Donald Trump even tweeted his party should "Go big or go home!!"

Democrats have said they will not budge on their US$2.2 trillion offer while the president already hiked the Republican plan to US$1.8 trillion - but which many in the party have said is too big.

"For now it is hard to see a deal being agreed before November 3, the market is still travelling with the notion that a new round of stimulus is coming, but at this stage this looks more likely after the election," said Rodrigo Catril at National Australia Bank.

"A (Joe) Biden win increases the prospect of a big stimulus especially if it comes with a Blue Wave while a Trump win suggest a stimulus package is likely to be smaller amid the prospect of a still divided Congress."

AFP