Asian shares sank on growing concerns over Covid-19 outbreaks and rising inflation while oil prices dropped after Opec+ nations agreed to boost production.
The latest stumble for stocks came as investors grappled with the rapid spread of the highly transmissible Delta variant of Covid-19, which has struck countries that had previously brought the virus under control.
In early morning trading on Monday, Japan’s Topix fell 1.4 per cent, while Hong Kong’s Hang Seng dropped 2 per cent. The CSI 300 index of Shanghai- and Shenzhen-listed stocks slipped 0.7 per cent and South Korea’s Kospi was down 1.1 per cent.
Futures markets showed further losses ahead for US-listed stocks, which ended Friday with their worst weekly performance in more than a month. S&P 500 futures were down 0.4 per cent, while those for London’s FTSE 100 dropped 0.8 per cent.
The falls coincide with Covid-19 outbreaks related to the Delta variant. New York state on Saturday recorded more than 1,000 cases in a day for the first time since mid-May, while authorities in countries including Australia and Vietnam were battling rising infections.
Vietnamese authorities on Monday imposed a stay-at-home order in the capital Hanoi and a two-week lockdown in southern regions to contain a record jump in cases, sending the Ho Chi Minh stock index down as much as 2.4 per cent.
Michael Hood, global multi-asset strategist at JPMorgan Asset Management, said the rapid spread of the Delta variant was “forcing investors to refocus on the virus at a time when most had been happy to leave that issue behind”.
Investor sentiment has also been hit by hints of rising inflation. US consumer price increases unexpectedly accelerated in June, data showed last week.
“Markets are also dealing with a burst of inflation pressure that hasn’t been observed for quite some time, with uncertainty about whether it will be temporary or lasting,” Hood added.
In commodities, oil prices fell after Opec and its allies reached a deal to raise oil production to counter increasing prices, announcing a plan to reverse all output cuts made during the pandemic by the end of 2022.
Brent crude, the international benchmark, dropped 1.6 per cent in Asian trading to $72.44 a barrel, while US marker West Texas Intermediate crude lost 1.5 per cent to $70.74.
Brent had soared to a three-year high of more than $74 a barrel as demand recovered this year, and it was uncertain whether the Opec+ cuts will be enough to offset upward pressure on prices as demand is expected to rise further in the months ahead.
In currencies, sterling fell 0.2 per cent to $1.3748 after Prime Minister Boris Johnson and two other senior cabinet ministers confirmed they would self-isolate on England’s so-called Freedom Day on Monday, as the country throws off its remaining pandemic restrictions.