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Asian markets turn lower as infection rates jump

Asian markets turn lower as infection rates jump

Business Desk Asian markets fell Friday as rising virus infection rates in the US put the brakes on the latest rally. Equities have shown a healthy resilience to the worryingly rapid spread of the disease around the world, with hopes for the economic recovery, the easing of lockdowns and government largesse providing crucial support. But several days of figures showing a record number of new cases in highly populated states including Florida, Texas and California - leading to the reimposition of containment measures - were beginning to sink in. Analysts also pointed out that while global markets have enjoyed healthy gains, those have mostly come thanks to traders moving into tech firms, which are more likely to benefit from further lockdowns. This is reflected in the tech-heavy Nasdaq index on Wall Street hitting multiple record highs over the past week, including Thursday. The US saw 65,551 new coronavirus cases, a record for a 24-hour period, with top infectious diseases expert Anthony Fauci calling for a pause in states' reopenings, though he added: "I don't think we need to go back to an extreme of shutting down." Donald Trump, who has openly said he disagrees with Fauci, has downplayed the spike in cases, saying the rise in cases was because more testing was being carried out. The Dow fell more than one percent and the S&P 500 also dropped, with traders unmoved by data showing the number of US workers filing for unemployment benefits last week fell by 99,000. Analysts warned the figure remained high and the latest reclosures in some states could lead to fresh layoffs. Asia tracked the New York losses, with profit-taking also playing a part after a broadly strong week. Tokyo ended the morning 0.3 percent down and Hong Kong shed 0.8 percent. Shanghai, which has been surging over the past week, was down more than one percent, also hit by news that authorities were cracking down on margin financing to avoid another bubble forming. Sydney slipped 0.1 percent and Seoul shed 0.8 percent while there were also losses in Taipei, Wellington and Manila. "Optimism is giving way to de-risking into the weekend as there is no way to sugar-coat, let alone the Fed papering over (with a financial back-stop), the new daily COVID-19 cases," said Stephen Innes at AxiCorp. However, he added: "The market is concerned about the uptick in cases globally, but given the ample liquidity backdrop, money is funnelling into perceived safe areas of the market like tech, which should hold up broader indexes to a degree." The risk-off mood hit oil prices and higher-yielding currencies as traders shifted to safer havens such as the yen and dollar. However, gold - another go-to asset in times of uncertainty - was hit by profit-taking after hitting eight-and-a-half-year highs on Thursday. Investors are also keeping tabs on the US presidential race, with Democratic candidate Joe Biden unveiling a multi-billion-dollar economy and jobs-boosting plan as well as new tax rules including hiking the country's corporate tax rate to 28 percent from 21 percent. Trump lags Biden in key states and nationally. On Thursday, most Asian markets rose following another record close on Wall Street as concerns about a new spike in infections around the world were overshadowed by optimism for the economic recovery. The giant wall of money stumped up by governments and central banks was also providing crucial support to nervous equity traders, even as certain countries reimpose some containment measures. And analysts expect the colossal cash back-up will likely continue to push asset prices higher. As long as central banks "have the intention of continuing to try to provide stimulus to the global economy, markets will continue to drive higher even as they dislocate from the fundamentals that would otherwise normally drive earnings and stock prices", Shana Sissel, at Spotlight Asset Group, told Bloomberg TV. In early trade, Hong Kong and Shanghai were each up 0.5 percent, while Tokyo gained 0.1 percent by lunch. Seoul, Taipei and Jakarta all added 0.5 percent and Singapore edged 0.1 percent higher. Sydney jumped 0.7 percent following Wednesday's sharp drop as Australia's second-biggest city Melbourne imposed a fresh lockdown on five million residents to combat a new virus outbreak. However, Wellington and Manila fell. The broad advance came after all three main New York indexes rose, with the Nasdaq rallying 1.4 percent to its fourth record in five sessions. The easing of lockdowns and a healthy run of economic data have provided a boost to world markets in recent weeks - with some up around 30-40 percent from March lows - though the major driver has been the trillions of dollars in stimulus and cheap credit. Britain on Wednesday unveiled a $40 billion budget to kick-start the economy, which tops up the $350 billion already set aside. "The US is also likely to continue its spending spree in August, with up to $1 trillion of additional stimulus, and should the EU's package be nearly as big as the initial proposal, liquidity won't be an issue in the developed world this year," said Ken Berman at Gorilla Trades. "China is also in the midst of an unprecedented liquidity 'experiment' and should the global economic recovery remain on track risk assets could be on fire in the second half of the year. Stay tuned!" While there are hopes for the economic recovery, investors also remain on edge about the spread of the coronavirus, which is surging across the US, forcing several states to reclose bars and restaurants. Measures are also having to be reimposed in Serbia, while France, which had flattened its curve by imposing a strict early lockdown, said Wednesday it was girding for a possible surge in cases, leading its new prime minister to soothe fears by promising no new full shutdown. Uncertainty about the outlook, along with an expectation that borrowing costs will remain anchored for some time, have sent gold prices soaring about a fifth this year and are now sitting above $1,800 for the first time since 2011. And because gold is seen as a good store of value, it is also winning support from fears of high inflation caused by central bank stimulus, analysts said.

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