Asia shares drop on China-US friction

TOKYO: Shares fell in Asia as skepticism set in about the recent upward momentum in global markets given rising confirmed coronavirus cases and percolating tensions between the US and China.

The White House’s decision to reject nearly all Chinese maritime claims in the South China Sea added to investor jitters. The world’s two largest economies have been sparring over everything from the pandemic to human rights.

Japan’s benchmark Nikkei 225 sank 0.8 percent in early trading to 22,609.57. South Korea’s Kospi lost 0.4 percent to 2,177.01, while Australia’s S&P/ASX 200 dropped 0.8 percent to 5,932.70.

Hong Kong’s Hang Seng tumbled 1.9 percent to 25,277.06 as reports of locally transmitted coronavirus cases prompted authorities to tighten precautions against the pandemic. The Shanghai Composite lost nearly 1.2 percent to 3,403.78.

One indicator of how bad the regional damage could get came from the advance estimate of Singapore’s gross domestic product, or GDP, for the second quarter. It showed a 12.6 percent year-on-year contraction, confirming Singapore’s worst recession ever.

“It is also the weakest result among our estimates for most Asian economies,” said Prakash Sakpal, a senior economist at ING, noting that the number was dismal, even though “Singapore wasn’t as badly affected by the Covid-19 pandemic as some of its Asian neighbors.”

Wall Street is getting a painful reminder of the threat the pandemic poses to the economy, as reopenings bring on fresh spikes in coronavirus cases.

The S&P 500 fell 0.9 percent, with all the losses accumulating in the last hour of trading after California said it will extend closures of bars and indoor dining across the state, among other restrictions.

It’s one of many states across the US West and South where coronavirus counts are accelerating and threatening the budding recovery that just got underway for the economy.

The announcement from California, which accounts for nearly 15 percent of the country’s economy, combined with the escalation by the White House of its tensions with China to knock the market down from its earlier gain of 1.6.

Technology stocks took the hardest hits, highlighted by Microsoft’s swing from an early gain of 1 percent to a loss of 3.1 percent.

It’s a sharp step back for tech-oriented giants, which have been cruising higher through the pandemic on bets that they can keep growing almost regardless of the economy.

“There’s an increasing sense that the recovery from the virus related shutdown is going to be more drawn out, more uneven than maybe the market was looking for,” said Willie Delwiche, investment strategist at Baird.

“And you add on top of that a number of tech companies that had run up tremendously over the past couple of weeks, so there’s a little bit of shaking out there as well.”

The tech losses helped drag the Nasdaq composite down 2.1 percent to 10,390.84. The Dow Jones Industrial Average squeaked out a gain of less than 0.1 percent, to 26,085.80.

It had earlier been up 563 points. The S&P 500 dropped 29.82 points to 3,155.22.

In a signal investors are downgrading their expectations for the economy, Treasury yields fell and smaller stocks did worse than their larger rivals. The Russell 2000 index of small-cap stocks lost 1.3 percent.