Asia stocks set for sluggish start after Wall Street declines

NEW YORK (Reuters) – Asian equities were set for a sluggish open on Wednesday, tracking a lower Wall Street session as concerns over rising coronavirus cases and fresh lockdowns dampened the euphoria from vaccine trial breakthroughs.

FILE PHOTO: A man wearing a protective face mask is reflected on a stock quotation board outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan November 10, 2020. REUTERS/Issei Kato

A skittish mood swept investors as several U.S. states began restricting gatherings and mandated face-coverings after more than 70,000 Americans were hospitalized for treatment of COVID-19 as of Monday, according to a Reuters tally of public health figures.

The surge in new coronavirus cases comes as vaccine trial results from Moderna on Monday showed that its COVID-19 vaccine candidate appears to be 94.5% effective in preventing infection. That announcement had caused markets to rally, with the Dow Jones and S&P 500 indexes reaching record highs.

“We’re are coming out of a solid two weeks so the market being down half a percent isn’t that bad with the prospect of COVID lockdowns,” said Jamie Cox, Managing Partner for Harris Financial Group.

Japan’s Nikkei 225 futures fell 0.35%, while Australia’s S&P/ASX 200 were up 0.4% in early trading.

Also weighing on sentiment was U.S. data on Tuesday that showed retail sales increased less than forecast in October, with the potential for even further slowing.

U.S. consumers also bought motor vehicles at a much slower pace than in previous months. There were increases in sales of electronics and appliances, as well as building materials and garden equipment but households cut back spending on sporting goods and hobbies, clothing, furniture, drinking and dining out.

On Wall Street, the Dow Jones Industrial Average fell 0.56%, the S&P 500 lost 0.48%, and the Nasdaq Composite dropped 0.21%.

U.S. Federal Reserve Chairman Jerome Powell said on Tuesday the current surge in coronavirus cases is a big concern, and the economy will continue to need both fiscal and monetary policy support.

Powell added that the Fed is committed to “using all of our tools to support the recovery for as long as it takes until the job is well and truly done.”

U.S. Treasury yields fell in the wake of the retail sales report as it underscored the possibility of a slowdown in the fourth quarter.

Benchmark 10-year notes last rose 11/32 in price to yield 0.8701%, from 0.906% late on Monday.

The U.S. dollar hit its lowest level in a week, with expectations for continued weakness on expectations for more fiscal and monetary stimulus as well as optimism over a potential vaccine.

The dollar index fell 0.082%, with the euro up 0.08% to $1.1862.

The offshore Chinese yuan rose to its highest since June 2018 against the dollar, as positive economic data in the world’s second-largest economy buoys the currency.

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