Asian shares down on virus risk, U.S.-China tension

 Asian shares and U.S. stock futures were bearish on Friday as record-breaking new coronavirus cases in several U.S. states stoked concern about economic recovery, while investors looked forward to earnings season.

Mainland China shares fell on Friday for the first time since June 29. Shares had surged to the highest since 2015 on Thursday, fueled by retail investor enthusiasm and policy support, even as regulators cracked down on margin financing and as state media warned of market risks.

“Weakness in financial stocks, with the bank sub-index down 2.5 per cent, comes ahead of next week’s Q2 reporting season that sees JP Morgan, Citigroup and Wells Fargo all report next Tuesday and following news that Wells Fargo is planning to cut ‘thousands’ of jobs starting later this year,” said Ray Attrill, head of FX strategy at National Australia Bank.

State funds also said they would reduce equity holdings, which investors interpreted as a another sign that Beijing prefers to take some steam out of the recent stock rally.

Asian Shares

  • MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.74 per cent.
  • Australian stocks declined by 0.31 per cent as an extension of loan payment deferrals hit the banking sector.
  • Japanese stocks were down by 0.58 per cent.
  • E-mini futures for the S&P 500 erased early gains to trade down 0.41 per cent.

Currency Markets

  • In the currency market, the yen edged up against the dollar and the euro as investors bought the traditional safe haven.
  • The Australian and New Zealand dollars , which are often traded as a liquid proxy for risk because of their close ties to China’s economy, both fell against the greenback.
  • The Aussie also fell as local officials use lockdowns and border restrictions to contain a sudden increase in coronavirus cases.

Oil Prices

  • U.S. crude fell 1.01 per cent to $39.22 a barrel,.
  • Brent crude edged 0.78 per cent lower to $42.02 per barrel due to concerns about a long-term decline in global energy demand.

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