Asian stock markets slipped on Tuesday, oil sagged and a safety bid supported the dollar as simmering Sino-U.S. tensions and fresh coronavirus restrictions in California kept a lid on investor optimism as earnings season gets underway.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%. Japan’s Nikkei retreated from a one-month high touched on Monday, dropping 0.8%. A firm dollar put pressure on the Aussie and kiwi.
The moves came after a selloff on Wall Street that followed reopening rollbacks in California, where Governor Gavin Newsom ordered bars closed and restaurants and movie theatres to cease indoor operations.
S&P 500 futures were flat in Asia after the index lost 0.9% on Monday.
Meanwhile tension grew between the United States and China. The United States on Monday rejected China’s disputed claims to offshore resources in most of the South China Sea – a shift in tone which prompted a rebuke from Beijing.
The Trump Administration also plans on scrapping a 2013 auditing agreement that could foreshadow a broader crackdown on U.S.-listed Chinese firms, as friction between the world’s two largest economies generates heat on a broad front.
California’s return to restrictions also has markets on edge about whether the virus can wreak more economic harm, as total infections surged by a million in five days and now top 13 million.
Oil prices, a proxy for global energy consumption and therefore growth expectations, reflected the growing worries. U.S crude futures fell 2% to $39.23 per barrel and Brent futures fell 1.8% to $41.94 per barrel.
The pullback in risk assets remains modest but has, at least temporarily, knocked the wind from the frothiest sections of the markets.
The tech-heavy Nasdaq shed 2% on Monday and shares of Tesla ended down 3%, tapping the brakes on a rally that has boosted the electric car maker’s stock by more than 40% in two weeks.
Along with the virus, there are also signs of an interruption to the steady flow of better-than-expected economic data. On Tuesday data showed Singapore entered recession last month, with the economy contracting 41.2% for the quarter, worse than the 37.4% analysts had forecast.
Chinese customs data showed exports and imports rising last month, in yuan-denominated terms, from the same period a year earlier. Dollar denominated figures are due later on Tuesday.
Currency markets hemmed the dollar in a tight range, with the kiwi stalling its grind higher at $0.6532 and the Aussie sat at $0.6941.
The euro hung on to overnight gains at $1.1346 though awaits German sentiment data at 0900 GMT for the next read on Europe’s recovery.
Spot gold sat below recent peaks at $1.797.30 per ounce and U.S. Treasuries were firm. The yield on benchmark 10-year U.S. government debt was $0.6168%.