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HONG KONG: Traders took a step back in Asian trade Tuesday as they struggled to extend Wall Street’s rally, with sentiment jolted by data suggesting China’s economic recovery was slowed down by an outbreak of the fast-spreading Delta Covid variant.
The positive energy stoked by a pledge from Federal Reserve boss Jerome Powell to be cautious in withdrawing the bank’s vast financial support appeared to have dissipated, replaced by fresh concerns over Beijing’s crackdown on private enterprises and the ever-present spectre of the coronavirus.
Further records for the S&P 500 and Nasdaq in New York were not enough to spur buying Tuesday after China released figures showing activity in the services industry contracted last month for the first time since March 2020.
Authorities imposed strict travel restrictions on swathes of the country this month to contain its worst outbreak of Covid since the beginning of the pandemic last year with dozens of cities affected and tens of millions of people subject to containment measures.
The moves saw flights cancelled and tourist spots closed while events were called off in a bid to nip the flare-up in the bud.
The “data again reflected the outsized and asymmetric shock on the service sector from Covid-related restrictions”, Liu Peiqian, at Natwest Markets said.
And while new case figures have been brought under control again, Liu warned any such spike in future will again likely hit the services sector. The issue came as several other countries — including Australia and New Zealand — are forced to impose tough measures to battle a surge in infections while also struggling with their vaccine rollouts.
Analysts said US Treasury yields remained subdued — indicating higher demand for the safe-haven assets — owing to lingering concerns over the impact of Delta on the recovery.
“The bond market is getting a little nervous about the economic outlook,” Priya Misra, at TD Securities, told Bloomberg Television.
