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Asian Stocks Slide, With Investors Losing Faith in COVID-19 Economic Recovery

·2 mins read

By Gina Lee – Asian stocks slumped on Thursday morning, following a slide in U.S. markets during the previous session, as the ever-rising number of COVID-19 cases and remarks from several U.S. Federal Reserve officials on Wednesday dimmed hopes for a global economic recovery from the virus.

With governments re-implementing lockdowns to curb fresh outbreaks in the U.S. and Europe, there are fears that more countries could see outbreaks with the arrival of cooler weather in parts of the Northern Hemisphere.

Fed officials stressed the need for more fiscal stimulus to sustain the recovery, with hope that the U.S. Congress ends its stalemate on passing the latest support measures before the U.S. presidential election in November fast diminishing. Led by Chairman Jerome Powell, who said that more support was likely needed during a congressional hearing, Cleveland Fed President Loretta Mester, Chicago Fed President Charles Evans and Boston Fed President Eric Rosengren also added their voices to the opinion.

Some investors struck a pessimistic note for the outlook.

“Markets are digesting and grappling with this idea that the growth expectations that investors have might not materialize,” New York Life Investments economist and multi-asset portfolio strategist Lauren Goodwin told Bloomberg.

“As the fiscal impulse in the U.S. starts to wane, some of these expectations for a slow and steady recovery are shaken,” she added.

Japan’s Nikkei 225 was down 0.78% by 11:30 PM ET (3:30 AM GMT) and South Korea’s KOSPI slid 2.05%.

In Australia, the ASX 200 was down 1.13% and Hong Kong’s Hang Seng Index fell 1.91%.

China’s Shanghai Composite was down 1.46% and the Shenzhen Component fell 1.85%. Investor sentiment was damped after an independent survey of more than 3,3000 businesses between August 13 and September 12 by the China Beige Book showed that economic recovery is only happening in the wealthier, coastal regions. The survey also highlighted the challenges for sectors such as services.

Also on investors’ radars is TikTok’s deal to sell its U.S. operations to Oracle (NYSE:ORCL). TikTok parent company ByteDance filed for a temporary block to U.S. President Donald trump’s ban on the app that could see the app removed from U.S. app stores over the upcoming weekend.

Meanwhile, Powell and U.S. Treasury Secretary Steven Mnuchin are due to testify before a Senate committee on the economic response to COVID-19 later in the day.

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