Fears of a second wave of coronavirus infections weighed on Asian equities and the dollar Tuesday, but easing lockdowns and hopes for economic recovery helped to lift European stock markets and oil prices.
As some of the worst-hit countries — including eurozone members Spain, Italy, and France — take heart from slowing COVID-19 death and infection rates, they are gradually allowing businesses to reopen.
However, in Wuhan, the central Chinese city where the coronavirus outbreak first emerged, there have been reports of new infections, while South Korea announced its biggest spike in new cases for more than a month.
WELP. South Korea orders bars and nightclubs to shut down again, for a further 30 days, after health officials tracked 13 new #Covid19 cases to a single person who attended five bars/nightclubs in Seoul. https://t.co/rxDOouz1W2
— Eric Feigl-Ding (@DrEricDing) May 9, 2020
“A cluster of new cases… serves as a warning that the infection rates could spike again if lockdown measures are eased too quickly,” said Fawad Razaqzada, analyst at ThinkMarkets trading group.
Stock markets in Hong Kong, Sydney, Mumbai, Taipei, Singapore, and Jakarta all closed down more than one percent Tuesday. Tokyo and Shanghai only dipped 0.1 percent however, while there were gains in Wellington and Bangkok.
In Europe around the half-way stage, London was up 1.0 percent while Paris dipped 0.2 percent.
“While markets may eventually desensitize to mini-cluster outbreaks, provided death statistics remain static… at this stage, it does not lessen fears of a significant secondary spreader, which will undoubtedly weigh on consumer sentiment and hurt the rebound,” said AxiCorp analyst Stephen Innes.
He added that investors would have to expect such uncertainty until a vaccine for the virus is found.
Losses for some equity markets Tuesday came following healthy pullbacks in recent weeks from troughs reached in March when lockdowns spread worldwide.
“It’s well and good to say ‘OK, we’ve contained the disease’, but how long does the recession last?” queried Chris Rands, at Nikko Asset Management. “Typically when you look at unemployment spikes they take years to fix, they don’t fix themselves in three months.”
Elsewhere Tuesday, oil prices jumped after Saudi Arabia said it would slash an extra million barrels per day from its June output. Kuwait and the United Arab Emirates also announced cuts after the pandemic caused global crude demand to plunge.
After last month’s historic collapse in oil prices below zero, the commodity has shot higher in recent weeks after top producers already agreed to slash output by a combined 10 million barrels per day.