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Asia stocks turn cautious on virus surge, geopolitics

Published 17/06/2020, 03:22 pm
© Reuters.
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* Asian stock markets: https://tmsnrt.rs/2zpUAr4

* Nikkei ease after rally, S&P 500 futures dip

* Mood restrained by surge in virus cases, China/India spat

* Recovery hopes supported by jump in US retail sales

By Wayne Cole

SYDNEY, June 17 (Reuters) - Asian share markets took a cautious turn on Wednesday as a resurgence of global coronavirus cases challenged market confidence in a rapid economic recovery, even as the rebound in U.S. retail sales in May broke all records.

New infections have hit record highs in six U.S. states and Beijing cut flights and closed schools to contain a fresh outbreak in the Chinese capital. serious second wave of cases in major developed countries is the biggest risk facing equity markets," said Shane Oliver head of investment strategy at fund manager AMP Capital.

"However, provided any second wave is relatively mild in terms of pressure on health systems and the number of deaths, its unlikely to reap the havoc seen back in March."

Geopolitics also lurked as a worry with India reporting 20 of its soldiers had been killed in clashes with Chinese troops at a disputed border site. Korea rejected a South Korea offer to send special envoys and vowed to send back troops to the border. was enough to inject a note of caution into trading and

Japan's Nikkei .N225 eased 0.5%, after jumping almost 5% on Tuesday for its biggest daily gain in three months.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS went flat, having climbed 2.8% the previous day, with most markets across the region little changed.

Chinese blue chips .CSI300 slipped 0.4% and E-Mini futures for the S&P 500 ESc1 0.2%. EUROSTOXX 50 futures STXEc1 and FTSE futures FFIc1 both dithered either side of flat.

That followed a robust session on Wall Street overnight. The Dow .DJI ended Tuesday up 2.04%, while the S&P 500 .SPX gained 1.90% and the Nasdaq .IXIC 1.75%.

Hopes for recovery had been bolstered by data showing U.S. retail sales jumped by a record 17.7% in May, recovering more than half the losses of the previous two months, though industrial output still lagged. Trump administration was also reportedly preparing an up to $1 trillion infrastructure package, something that was initially promised more than three years ago. THE WORST

"There is little doubt that the global economy bottomed in April and is poised to post record-high growth rates over May and June, strongly lifting 3Q GDP above its 2Q trough," wrote economists at JPMorgan (NYSE:JPM).

"But questions about the extent of lasting damage will have to wait for a number of months before being resolved."

Federal Reserve Chair Jerome Powell cautioned that output and employment would remain well short of their pre-pandemic levels for a long time, so there was a "reasonable probability" that more policy support would be needed. the talk of recovery caused headwinds for sovereign bonds, though U.S. Treasuries did recoup some of the losses in Asia.

Thirty-year yields US30YT=RR were last down two basis points at 1.52%, having risen by the most in a month on Tuesday.

The U.S. dollar bounced modestly from recent three-month lows to stand at 96.978 against a basket of currencies =USD .

The euro stood at $1.1268 EUR= from its recent top of $1.1422, while the dollar was sidelined on the Japanese yen at 107.23 JPY= .

In commodity markets, gold was stuck at $1,725 XAU= and well within the $1,670/$1,764 range of the past few weeks.

Oil prices were pulled back by an increase in U.S. crude inventories, having climbed 3% on Tuesday after the International Energy Agency (IEA) raised its oil demand forecast for 2020. O/R

Brent crude futures LCOc1 slipped 71 cents to $40.25 a barrel, while U.S. crude CLc1 lost 94 cents to $37.44.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets

https://tmsnrt.rs/2zpUAr4 Asia-Pacific valuations

https://tmsnrt.rs/2Dr2BQA

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Lincoln Feast & Simon Cameron-Moore)

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