Asian share markets have had a shaky start as the relentless spread of the coronavirus finally made investors question their optimism on the global economy, benefiting safe harbour bonds and the US dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2 per cent on Monday and further away from a four-month top hit last week.
Japan’s Nikkei shed 1.5 per cent and South Korean stocks 1.4 per cent. E-Mini futures for the S&P 500 lost 0.3 per cent.
Wall Street had faltered on Friday as some US States reconsidered their reopening plans. The global death toll from COVID-19 reached half a million people on Sunday, according to a Reuters tally.
About one-quarter of all the deaths so far have been in the United States, with cases surging in a handful of southern and western states that reopened earlier.
“The increase in US COVID-19 infection rates has dented momentum across markets despite the improvements in the global economy, which continues to beat most data expectations,” JPMorgan analysts wrote in a note.
“Our strategists remain sanguine and recommend to buy on dips but also selectivity,” they said. “Traditional hedges like JPY vs USD, USD vs EM FX, Gold and quality stocks are still outperforming this month. We stay overweight US equities but move EM equities to neutral and stay neutral US credit.”
Sovereign bonds benefited from the shift to safety with yields on US 10-year notes falling to 0.63 per cent, having briefly been as high as 0.96 per cent early in June.
The US dollar went the opposite direction, rising to 97.461 against a basket of currencies from a trough of 95.714 earlier in the month.
It was a shade higher on the yen at 107.20 on Monday but well within the recent range of 106.06 to 107.63. The euro stood at $US1.1222 having found solid support about $US1.1167.
It is an important week for US data with the ISM manufacturing index on Wednesday and payrolls on Thursday, ahead of the Independence Day holiday. Federal Reserve chair Jerome Powell is also testifying on Tuesday.
In commodity markets, gold held near its highest since early 2012 at $US1,771 an ounce.
Oil prices slipped amid concerns the pandemic would slow the reopening of some economies and thus hurt demand for fuel.
Brent crude futures fell 62 cents to $US40.40 a barrel, while US crude lost 60 cents to $US37.89.