By Gina Lee
Investing.com – Asian stocks were down in Tuesday morning, halting the previous day’s rally as investors digest the incessant climb in COVID-19 cases.
There are over 13 million cases globally as of July 14, according to Johns Hopkins University data. A World Health Organization (WHO) official warned on Monday that things will not return to normal “for the foreseeable future” as the virus continues to spread.
California’s governor Gavin Newsom announced a retreat from the state’s re-opening plan and re-imposed lockdown measures on Monday.
“The U.S. continues to report fresh highs of daily new infections. However, the seriousness of the disease is falling. Hospitalization rates...has trended down since April,” said Kim Mundy with the Commonwealth Bank of Australia (OTC:CMWAY) in Sydney, in an analyst note. “The upshot is the surge in infections does not give the full story. And it suggests the U.S. is learning to live with the disease.”
Meanwhile, Hong Kong imposed its strictest social distancing measures to date as the number of cases rises in the city, where 41 cases were reported on Monday.
But some investors painted a gloomier picture, as they expect a correction to the equity market’s recent weeks-long rally.
“There is a risk that the divergence between a gloomy economic outlook and unexpectedly strong returns from equity markets is reconciled by some pull-back in asset prices rather than a surge in economic optimism,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, warned in a note. “There is a case for caution.”
Meanwhile, tensions between the U.S. and China continue to simmer after U.S. Secretary of State Michael Pompeo’s statement on Monday rejecting Chinese claims in the South China Sea. Pompeo issued his statement after China’s recent military exercises in the contested waters around the South China Sea’s Paracel Islands.
China hit back on Tuesday morning, rejecting the U.S. statement and calling Pompeo’s accusations of China bullying its neighbors “completely unjustified”.
The South China Sea is the latest addition to a list of differences between the two countries, with the list also encompassing trade and the national security laws enacted in Hong Kong earlier in the month.
China’s Shanghai Composite fell 0.55% by 10:26 PM ET (3:36 AM GMT) and the Shenzhen Component was down 0.17%. China is expected to release trade data for June later in the day, with a second batch, including GDP figures, due on Thursday.
Hong Kong’s Hang Seng Index slid by 1.42%.
Japan’s Nikkei 225 fell 0.87% and South Korea’s KOSPI is down 0.41%
Down Under, the ASX 200 fell 0.55%. Some Australian states are re-imposing lockdowns as fears spread of an outbreak in Sydney. The outbreak in the country’s most populous city follows a second wave in Melbourne, which is currently on day seven of a second lockdown.