Asian stocks under pressure by fears over Delta virus variant, US data at a glance

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SYDNEY – Asian stocks edged down on Tuesday amid fears that new coronavirus outbreaks in the region could undermine the economic recovery, even as strong momentum in the United States is prompting the Federal Reserve to consider an earlier exit from accommodative policy.

MSCI’s largest Asia-Pacific stock index outside of Japan was 0.11% lower, hovering near recent highs, though momentum has halted as some countries reimpose lockdowns to contain the spread of the Delta virus variant.

Australian and Japanese stocks suffered the first losses, with the ASX / 200 index down 0.76% and the Nikkei down 0.91%. The South Korean market was down 0.39% and Chinese stocks were also down 1.06%.

Fears over the spread of the highly infected variant of the Delta virus have rattled sentiment at a time when markets remain on edge after the Fed shocked traders with a hawkish tilt earlier this month.

Australia is struggling with small but fast-growing epidemics with instant lockdowns in several cities, while Indonesia is also struggling with record cases, Malaysia is on the verge of extending a lockdown and Thailand has announced new restrictions.

“The markets are really treading water ahead of the very important US labor data later in the week,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

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“We have a month and a quarter end and here (Australia) a fiscal year ends tomorrow, so that’s probably another reason the markets don’t want to have a particularly strong view of things. “

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On Friday, a closely watched US employment report for June will be released, which could sway the Fed’s outlook and push forward interest rate hike expectations.

“Inflation is already much higher than what the Fed had anticipated, so it is really the pace of improvement in the labor market that outstrips all other indicators in terms of when the Fed will feel comfortable. to signal the start of the reduction, ”said Attrille.

News of a possible bipartisan deal on infrastructure spending in the United States over the weekend helped boost risk appetite overnight.

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On Wall Street, the Nasdaq and S&P 500 gained 0.98% and 0.23% respectively to hit all-time highs on Monday, fueled by tech stocks as investors bet on a strong earnings season.

Big tech companies including Facebook Inc, Netflix Inc, Twitter Inc and Nvidia Corp were among the leaders, helping the S&P 500 maintain momentum after posting its best weekly performance in 20 weeks on Friday. In contrast, the Dow Jones Industrial Average fell 0.44 and cyclical sectors fell sharply amid fears about the surge in COVID-19 cases in Asia.

In currency markets, the US dollar was largely flat as investors sat on the sidelines ahead of Friday’s jobs report.

Investors are also looking at U.S. consumer confidence data on Tuesday as well as the Institute for Supply Management’s manufacturing index on Thursday for clues to the direction of interest rates.

Both the dollar and the yen have benefited from demand for safe havens driven by concerns over the spread of the Delta virus strain.

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The greenback was little changed against the euro at $ 1.192 and against the Japanese yen at 110.46 yen.

Benchmark 10-year US Treasury yields also remained stable at 1.483.

Brent crude was down 0.28% to $ 74.43 a barrel. US crude last fell $ 0.18, or 0.25%, to $ 72.73 a barrel. Spot gold was little changed at $ 1,777.12 an ounce at 1:33 a.m. GMT).

(Reporting by Paulina Duran in Sydney; editing by Shri Navaratnam)