By YURI KAGEYAMA, AP Business Writer
TOKYO (AP) – Asian stocks fell on Tuesday as concerns grew that a faster-spreading variant of the coronavirus could upend the global economic recovery.
Japan’s Nikkei 225 benchmark slipped 0.9% to 27,417.75. South Korea’s Kospi lost 0.6% to 3,226.19. The Australian S & P / ASX 200 lost 0.5% to 7,252.20. The Hong Kong Hang Seng lost 1.1% to 27,189.43, while the Shanghai Composite lost 0.2% to 3,531.54.
Concerns about the pandemic continue in Japan, three days before the opening of the Tokyo Olympics. Some 11,000 athletes are participating in the Games, and 22,000 more have arrived since July 1 to participate in the Games.
Several athletes and over 60 other non-athletes affiliated with the Games have tested positive. Fears are growing that, despite repeated testing, infections could spread.
The roll-out of vaccination has been slower in Japan than in other developed countries, with only 22% of the population fully vaccinated. Another cause for concern is reports that fully vaccinated people have been infected. The Japanese government has repeatedly promised “safe and secure” Games.
On Wall Street, the S&P 500 fell 1.6% to 4,258.49, after setting a record a week earlier. Another sign of concern, the 10-year Treasury yield hit its lowest level in five months as investors scrambled to find safer places to put their money.
The 10-year Treasury yield remained stable at 1.21% after falling to 1.20% on Monday from 1.29% on Friday night. In March, it was around 1.75%.
The Dow Jones Industrial Average fell 2.1% to 33,962.04, while the Nasdaq composite fell 1.1% to 14,274.98.
Airlines and other businesses that would be most affected by potential COVID-19 restrictions suffered some of the heaviest losses, similar to the early days of the pandemic in February and March 2020. United Airlines lost 5.5% , mall owner Simon Property Group dropped 5.9% and cruise line Carnival fell 5.7%.
The World Health Organization says cases and deaths are increasing globally after a period of decline, spurred by the highly contagious delta variant. And given how tightly connected the global economy is, a blow anywhere can quickly affect the other side of the world.
Even in the United States, where the vaccination rate is higher than in many other countries, residents of Los Angeles County are once again required to wear masks indoors, whether or not they are vaccinated as a result of peaks of cases, hospitalizations and deaths.
Any worsening trends in the virus threaten the high prices that the stocks have reached over expectations that the economy will achieve these high forecasts.
“It’s a bit of an overreaction, but when you have a market that’s hitting record highs, that’s had the kind of run we’ve had, with virtually no hindsight, it becomes extremely vulnerable to all kinds of bad news.” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. âIt was just a question of what that tipping point was, and it looks like we finally hit it this morningâ with concerns about the delta variant.
He and other analysts are bullish stocks can rebound quickly. Investors have been trained recently to view every drop in stocks as just an opportunity to buy low.
Barry Bannister, chief equity strategist at Stifel, was more pessimistic. He says the stock market may be in its early stages for a decline of up to 10% after its sharp rise. The S&P 500 nearly doubled after hitting its low in March 2020.
“The reviews, they got too frothy,” he said. “There was so much optimism there.”
Along with new variants of the coronavirus, other risks to the economy include dwindling pandemic relief efforts from the US government and a Federal Reserve which is expected to start cutting aid to markets later this year.
Monday’s selling pressure was widespread, with nearly 90% of S&P 500 stocks falling. Even Big Tech stocks fell, Apple down 2.7% and Microsoft down 1.3%.
This week also brings a plethora of earnings reports. Across the S&P 500 as a whole, analysts are forecasting earnings growth of nearly 70% for the second quarter from a year ago. It would be the strongest growth since 2009, when the economy was emerging from the Great Recession.
In energy trading, benchmark US crude rose 10 cents to $ 66.52 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, added 40 cents to $ 69.02 a barrel.
In currency trading, the US dollar rose from 109.46 yen to 109.52 Japanese yen. The euro fell to $ 1.1779 from $ 1.1802.
AP Business editors Stan Choe, Alex Veiga and Damian J. Troise contributed.
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