Asia report: Markets finish weaker amid fresh Covid clusters

Markets in Asia were red across the board on Monday, with investors spooked by the possibility of fresh spikes in cases of Covid-19, as authorities in Beijing reported new infections in the city.

In Japan, the Nikkei 225 slid 3.47% to 21,530.95, as the yen strengthened 0.11% against the dollar to last trade at JPY 107.26.

Of the major components on the benchmark index, robotics specialist Fanuc was down 5.25%, Uniqlo owner Fast Retailing lost 5%, and technology giant SoftBank Group was 3.27% weaker.

The broader Topix index was down 2.54% by the end of trading in Tokyo, closing at 1,530.78.

On the mainland, the Shanghai Composite was off 1.02% at 2,890.03, and the smaller, technology-centric Shenzhen Composite slipped 0.29% to 1,865.34.

In fresh economic data out of China, the country missed expectations for industrial production, which was up 4.4% year-on-year in May - less than the 5% anticipated by analysts polled by Reuters.

Retail sales were also worse than expected, falling 2.8% over the previous year in May - wider than the 2% drop pencilled in by Reuters polling.

Coronavirus was also on traders’ minds in the People’s Republic, after authorities in Beijing said a district of the Chinese capital was under ‘wartime emergency’ measures after the discovery of a cluster of Covid-19 infections around a wholesale market.

South Korea’s Kospi plunged 4.76% to 2,030.82, while the Hang Seng Index in Hong Kong lost 2.16% to 23,776.95.

Both of the blue-chip technology stocks were weaker in Seoul, with Samsung Electronics down 4.59% and chipmaker SK Hynix off 3.76%.

Equities on the Korean peninsula were particularly bruised on Monday, as the government in Seoul held an emergency security meeting in the wake of military threats from Pyongyang.

Kim Yo Jang, the sister of North Korean leader Kim Jong Un, reportedly said her army would “surely” launch some form of military action against South Korea.

Alongside the fresh cluster of infections in Beijing, investors were also watching the spread of the coronavirus in the US, with the states of North Carolina and Texas reporting record numbers of hospitalisations on Saturday.

“We are seeing pockets of cases in Beijing suddenly - the first in 50 days, whilst Alabama, Florida and South Carolina have reported record numbers of new cases for three days straight,” said Neil Wilson, chief market analyst for Markets.com.

“The dreaded second wave will weigh on equity markets - it is already sparking a wave of selling – and force policymakers to chuck even more money at this.”

Wilson said markets only needed to think things were heading in the right direction to go up, adding that it was the rate of change that mattered, meaning fresh waves of cases would be taken as a sell signal.

“Equity markets had also clearly become overstretched and overbought.”

Oil prices were lower as the region went to bed, with Brent crude last down 0.75% at $38.44 per barrel, and West Texas Intermediate off 1.66% at $35.66.

In Australia, the S&P/ASX 200 was 2.19% weaker at 5,719.80, as the country’s big four banks marched into the red once more.

Australia and New Zealand Banking Group was down 2.7%, Commonwealth Bank of Australia lost 1.52%, National Australia Bank was 2.64% weaker, and Westpac Banking Corporation fell 2.85%.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.38% to 10,864.12, led lower by casino and hotel operator SkyCity, which was off 4%.

Both of the down under dollars were weaker on the greenback, with the Aussie last off 0.63% at AUD 1.4657, and the Kiwi retreating 0.23% to NZD 1.5550.