SYDNEY- Asian stocks were in the red on Tuesday as surging COVID-19 cases in China hit the confidence of investors who are already worried about the Ukraine war and the first US interest rate rise in three years, which could come this week.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.91 percent, led by Chinese stocks. The index is down 8.2 percent so far this month.
Hopes that talks between Russia and Ukraine due to resume on Tuesday could provide a resolution to the conflict prompted a sharp fall in global oil prices.
However, the fourth round of negotiations began Monday with no major progress seen, adding to the nervousness in equity markets.
During the Asian session, US crude slipped a further 2.54 percent to $100.44 a barrel, in line with broader asset selling. Brent crude was down 2.27 percent to $104.42 per barrel.
In US trading, oil prices had fallen as much as 5.8 percent as prospects of a positive outcome in Ukraine talks eased concerns about major supply disruptions.
But adding to the overall negative sentiment are rising case numbers of COVID-19 in China, which investors fear will hurt the mainland’s economic growth in the first quarter.
“Right now everyone is looking at the Chinese cases and realizing that has to have an effect on production,” said Hong Hao, BOCOM International’s head of research.
“China’s growth in the first quarter could be closer to zero than 5.5 percent. There’s a ripple effect. There’s Ukraine, the risk of US sanctions on China and rising Chinese domestic COVID cases – it does not look good.”
Hong Kong’s Hang Seng Index remains mired in negative territory, dropping 3.8 percent early on Tuesday, following an almost 5 percent selloff one day earlier. Hong Kong’s main board is down 17 percent so far in March.
