Stocks drop as infection numbers rattle investors

worsened over Hong Kong, trade and other issues.

“Risk appetite is struggling as the coronavirus spread is still not under control in most parts of the world and as geopolitical tensions between China and the West intensify,” said Edward Moya, an analyst with OANDA.

A giant wall of money stumped up by governments and central banks has been providing support to global asset prices, but that offered stock prices little protection yesterday.

Gold, by contrast, held above the $1,800 level it had breached for the first time in more than eight years on Wednesday on safe-haven buying.

There was better news in Asia earlier, where Shanghai rallied more than 1% as data showed a pick-up in inflation that indicates the world’s number-two economy continues to improve.

Asia’s investors are riding high after a front-page editorial in Monday’s China Securities Journal extolling market fundamentals was seen as official encouragement to buy stocks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% and touched a 20-week high.

Sydney rebounded slightly after Wednesday’s sharp drop as Australia’s second-biggest city Melbourne imposed a fresh lockdown on fivemn residents to combat a new virus outbreak.

“Broadly speaking, the Chinese economy is coping better not only with a recovery but also in dealing with the potential of a second wave (of infections),” said National Australia Bank FX strategist Rodrigo Catril.

“Rightly or wrongly, that market is liking the idea that the yuan can strengthen on the back of equity inflows.”

China’s factory gate prices fell for a fifth straight month in June but signs of a pickup in some parts of the sector suggest a slow but steady recovery remains intact.

Deutsche Bank’s chief international strategist, Alan Ruskin, said the yuan enjoyed the “perfect combination” of tight monetary policy, yield advantage and equity demand.

In any case, its rally was not to be derailed by growing pressure from the West over China’s tightening grip on Hong Kong, nor was sentiment dented by surging US virus cases and a fresh lockdown of 5mn Australians in Melbourne.

Australia yesterday suspended an extradition agreement with Hong Kong and urged its citizens to reconsider the need to remain there if they are concerned about new national security laws that extend Beijing’s power in the city.

China’s top diplomat said yesterday that China-US relations face the most serious challenges since diplomatic ties were established.

US jobs data due at 1230 GMT will offer the next checkup on the recovery’s progress, followed by results next Tuesday from JP Morgan, Citigroup and Wells Fargo ahead of Microsoft and Netflix yesterday.

“Earnings season is upon us, and we really want to see what it looks like,” said Jun Bei Liu, a portfolio manager at Australia’s Tribeca Investment Partners.

The focus will be on the outlook as well as on understanding how deeply stimulus efforts have flowed through the real economy, she said. Commodities seem to be laying a bet each way.

Brent crude was flat at $43.28 per barrel and US crude fell 0.2% to $40.82 per barrel as concerns about oversupply weigh.

But Shanghai copper hit a 16-month high on supply worries in top producer Chile.