HONG KONG (AFP) - Most Asian markets edged up yesterday following an across-the-board sell-off the previous day, but disappointing recent data has jolted optimism over the economic recovery that has helped drive gains for the past few months.
Traders have for weeks been able to look past fresh spikes in infections around the globe to focus on the trillions of dollars spent on government support and the easing of lockdowns.
But with containment measures being reintroduced in parts of the world that had appeared in control of the outbreak - including Hong Kong, Japan and Australia - confidence has taken a hit.
Data out of China on Thursday showed that while the economy grew more than expected, the crucial reading on retail sales was below forecasts, indicating consumers - key to reigniting growth - were still reluctant to go out and spend. A later report showed US retail sales continued to rise in June, but at a slower pace than May.And new claims for US unemployment benefits last week were little changed from the previous week at 1.3 million, a historically high level.
Economists fear the figure might rise again as major states including California and Texas impose fresh lockdown measures.
“Data released over the last 24 hours seriously questions the speed of any post-COVID-19 economic recovery,” said Michael McCarthy, at CMC Markets. “The numbers illustrate the economic challenges posed by secondary infection outbreaks.”
Markets around the world tumbled Thursday, though they staged a mild recovery ahead of
Hong Kong added 0.5 percent and Shanghai inched up 0.1 percent after collapsing 4.5 percent following a rally of around 15 percent since the start of July.
Mumbai rose 0.7 percent, despite news that India had become the third country to record more than a million cases of COVID-19, while lockdowns are put in place in several regions.
Sydney added 0.4 percent and Seoul climbed 0.8 percent. Taipei, Bangkok and Wellington also edged up but there were losses in Manila, Singapore and Jakarta.
Tokyo finished 0.3 percent lower, while London and Frankfurt rose and Paris was flat.
But observers were cautious about the outlook for the recovery in light of the surge in new infections.
“Try as one may, it’s challenging to look through the makeup of China’s economic recovery, which offers a roadmap to the rest of the world that is not especially bullish for one that is wholeheartedly predicated on consumer-driven recovery,” said Stephen Innes at AxiCorp. “Forget about a V, this is going to be a lengthy S-L-O-G shaped recovery,” he added.
Eyes will be on Europe, where leaders will later Friday begin their first face-to-face summit in five months to discuss their US$ 850 billion economic rescue package.
There are low expectations for an agreement this weekend, with Denmark, Sweden, Austria and the Netherlands holding out against stumping up for their southern neighbours without strict conditions, but there is hope something can eventually be hammered out.
“The political support is there for a deal and the frugal four may use this summit to voice their final concerns over joint debt and grants for the weaker states,” said OANDA’s Edward Moya.
“Wall Street is fully expecting EU leaders to get this stimulus package done, but there is a chance it doesn’t get finalised this week. A deal will be made, it just might take a couple more weeks.”