Stocks dip as new COVID-19 strain darkens recovery prospects

HONG KONG (Reuters) -Asian shares widened losses on Tuesday, extending a pullback from multi-year highs hit last week on fears a highly infectious new strain of COVID-19 that hit Britain could lead to a slower global economic recovery.

FILE PHOTO: An investor places his hands on the back of his head in front of an electronic board showing stock information at a brokerage house in Hefei, Anhui province, China, May 2, 2012. REUTERS/Stringer

Sentiment continue to sour with FTSE futures down 0.14% and E-mini futures for the S&P 500 index off 0.29%, even as the U.S. Congress on Monday approved a long-awaited $892 billion coronavirus aid package.

Australia’s S&P/ASX 200 was 1.21% lower. Japan’s Nikkei 225 was down 0.77% in the afternoon session, touching its lowest levels in two weeks, as investors took profit from stellar gains over the past couple of months.

“Any selling is probably not going to find much resistance. The clients I speak to are more inclined to be locking in some gains than piling in more money,” said John Milroy, investment advisor at Ord Minnett, a Sydney-based stock broker.

MSCI’s gauge of Asia Pacific stocks outside Japan fell 0.75%. Hang Seng Index further slipped 0.63% and China’s benchmark CSI300 Index declined 0.35%.

“An escalation of European COVID-19 restrictions in response to fears around a new variant, which is supposed to be faster spreading, should, and did, of course, elicit a negative reaction from prices via the near-term global growth impact,” said Stephen Innes, Chief Global Market Strategist at Axi.

“Illiquid conditions will persist through year-end, but dips like this could present more of an opportunity to fade than anything else,” he said.

Countries across the globe shut their borders to Britain on Monday due to fears about a new strain of coronavirus, said to be up to 70% more transmissible than the original, causing travel chaos and raising the prospect of food shortages days before Britain is set to leave the European Union.

The discovery of the new strain, just months before vaccines are expected to be widely available, renewed fears about the virus, which killed about 1.7 million people worldwide. As a result European shares fell on Monday in their worst session in almost two months.

Sterling fell as much as 2.5% to $1.3190 on virus concerns. Against a basket of currencies the dollar is headed for a third quarterly loss in a row and is down 12.5% from a three-year peak in March.

Oil prices dropped on expectations of lower demand, with U.S. crude recently down 0.34% at $47.63 per barrel, while Brent was 0.55% lower at $50.63.

Spot gold rose 0.1% to $1,878.15 per ounce, with the safe-haven asset hitting a one-month high earlier in the session.

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