Markets in retreat after latest stocks surge

A photographer takes pictures of the German share price index (DAX) board at the stock exchange in Frankfurt, Germany, February March 9, 2020. — Reuters pic
A photographer takes pictures of the German share price index (DAX) board at the stock exchange in Frankfurt, Germany, February March 9, 2020. — Reuters pic

HONG KONG, July 7 — Asian markets mostly fell today as traders took a step back after their latest rally, with a run of upbeat economic data offset by fears over a spike in new virus infections.

While several countries are suffering a fresh surge in infections — particularly the United States — the ongoing easing of lockdown measures and reopening of economies has been the key driver of a months-long surge across equities.

After the latest advances, which saw Shanghai hit a two-year high and the Nasdaq on Wall Street end at another record, dealers stepped back and took profits.

There was also some trepidation on trading floors after Donald Trump’s top infectious diseases expert warned the US was still “knee-deep” in its first wave of coronavirus infections.

Anthony Fauci said the country was in “a serious situation that we have to address immediately”.

That came as several states reported new daily records for new cases, with some reimposing lockdowns.

Today, Australian authorities said more than five million residents of Melbourne, the country’s second-biggest city, will be locked down for six weeks after virus cases surged.

In afternoon trade Hong Kong shed 0.5 per cent, having climbed more than eight per cent over the previous four trading days, while Tokyo, Seoul, Singapore, Taipei and Manila were also in negative territory.

Sydney, Mumbai and Jakarta were flat, while London, Paris and Frankfurt opened with losses.

But Shanghai rose 0.4 per cent, having surged almost six per cent yesterday as retail investors piled back into the market.

Observers also pointed to an editorial in the China Securities Times yesterday that said fostering a “bull market” after the virus crisis was crucial to kick-starting the world’s number two economy.

The composite index has risen more than 10 per cent in just over a week, though there are worries about another bubble similar to the one that burst four years ago and sparked a global rout.

More gains to come?

“China’s army of retail investors seem to be perfectly able to look through the worrying Western media headlines of another global coronavirus record,” said AxiCorp’s Stephen Innes.

“Instead, they are listening to the enthusiastic chorus from the nation’s influential state media, which are universally singing bullish from the same song page.”

He cited reports saying there had been a recent surge in new brokerage account openings.

Wellington and Bangkok also rose.

Traders have for weeks been trying to balance the reopening of economies with worries about the disease as it continues its march across the planet.

Yesterday there was more positive data, with an index of the US service sector — which makes up the vast majority of the economy — seeing its biggest-ever jump in June to beat forecasts.

“Investors have recognised that as bad as the economy in the US is, it’s not as bad as what people thought it would look like in March and April,” said Nancy Prial at Essex Investment Management.

“The market has started to sense we might see better-than-anticipated results fairly broadly across a wide spread of companies.”

In a sign that the reporting season could be positive, Samsung Electronics said today it expects to see operating profit jump 23 per cent in the second quarter, which is much better than the single-digit fall that analysts had forecast.

The firm appears to have benefited as lockdowns boosted its chip business with data centres moving to stockpile DRAM chips to meet surging demand for online activities. — AFP

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