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Asian stocks drop as virus recovery begins to look distant

By Administrator_India

Capital Sands

Asia’s stock markets fell and gold hit a one-week high on Thursday as worries about a second wave of coronavirus infections and a dour assessment of the way back from the head of the U.S. Federal Reserve dashed hopes for a quick recovery.

Fed Chair Jerome Powell warned of an “extended period” of weak economic growth, while vowing to use the U.S. central bank’s power as needed and calling for additional fiscal spending to stem the fallout from the pandemic.

“The path ahead is both highly uncertain and subject to significant downside risks,” Powell said in a webcast speech.

Adding to investors’ angst, a top World Health Organization official said the virus may never go away.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1%, while Japan’s Nikkei  fell about 0.7%.

U.S. stock futures fell 0.2%, after the S&P 500 index’s worst two-day drop in nearly a month.

Benchmark indexes in Australia, Hong Kong , Korea  and China all fell about 1%.

“We don’t think the market is going to re-test the lows, but it’s probably seen its best also, so I’m expecting a correction,” said Tony Huntley, chief investment officer at Melbourne-based fund manager Adansonia Capital.

“The issue is whether we get a second wave (of infections) … that would be my greatest fear.”

South Korea is dealing with a fresh outbreak in Seoul, while China has re-imposed movement restrictions near its borders with North Korea and Russia after a new outbreak was detected there.

Overnight, Wall Street’s three major indexes closed lower for a second day in a row.

Bonds and the dollar rallied after Powell talked down the prospect of negative interest rates in the United States, and extended gains on Thursday. Yields on benchmark U.S. 10-year Treasuries fell slightly to 0.6412%.

Oil prices slipped in spite of a surprise drawdown of U.S. inventories and gold was firmly above the $1,700 mark, touching a week-high $1,719.11 per ounce.

Markets are looking ahead to the release of the European Central Bank’s latest economic bulletin at 0800 GMT and the latest U.S. jobless claims data at 1230 GMT.