TOKYO Asian shares gained Tuesday, boosted by a near-record rise on Wall Street, though the momentum began to fizzle out over worries about the economic fallout from surging coronavirus infections in the region.
Japans benchmark Nikkei 225 JP:NIK rose nearly 1% in morning trading while South Koreas Kospi KR:180721 gained 1.4%. Australias S&P/ASX 200 AU:XJO rose 0.3%. Hong Kongs Hang Seng HK:HSI added 1.6%, while the Shanghai Composite CN:SHCOMP was up 1%. Stocks dipped in Indonesia ID:JAKIDX, but advanced in Singapore SG:STI and Taiwan TW:Y9999.
Some parts of Asia have had slower vaccine rollouts than the U.S. and Europe and are at a greater risk for the more contagious delta variant.
Outbreaks in Asia Pacific have led to new containment measures, disrupting production and trade in a region that accounts for 37% of global merchandise exports, said Sara Johnson, executive director, global economics, IHS Markit. Asia Pacifics manufacturing hubs are the current hotspots for COVID-19.
She noted vaccination campaigns outside mainland China have been slow in Asia, hurting consumer spending, tourism, industrial production and exports. The IHS Markit manufacturing PMI surveys for July show deteriorating business conditions in Indonesia, Malaysia, Myanmar, Thailand and Vietnam. Cases of COVID-19 infections have been falling in India, Taiwan, and Indonesia, but rising in Japan, South Korea, Malaysia, the Philippines, and Vietnam.
Risk-on sentiments largely followed through with the positive lead from U.S. indices overnight. Some catchup growth may be on watch, considering that Asian markets have been diverging in performance from their Western counterparts since June. Ongoing Covid-19 risks continue to be prevalent, said Yeap Jun Rong, market strategist at IG in Singapore.
On Wall Street on Monday, the S&P 500 rose 0.9%, lifted by technology, communication and financial stocks, after spending much of the day within striking distance of its own record high. The benchmark index ended less than 0.2% below its all-time high set a week ago.
Pfizer PFE rose 2.5% after the Food & Drug Administrationgave full approval to its COVID-19 vaccine. The vaccine had been under an emergency use authorization since December, but the full approval could convince some reluctant Americans to now get their shot and will likely give local authorities the legal backing to impose mandates.
BioNTech BNTX, a German drug manufacturer which developed the vaccine with Pfizer, jumped 9.6% on the news. Moderna MRNA, which developed a similar vaccine that uses the same technology, vaulted 7.5%.
The prospects of more vaccinations and signs of some easing in the growth rate of coronavirus cases, helped put investors in a buying mood, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Hopefully, the FDA approval increases the uptake of the vaccine, said Samana. The markets gains shouldnt be viewed as anything other than a vaccine rally.
The S&P 500 SPX rose 37.86 points to 4,479.53. The Dow Jones Industrial Average DJIA added 215.63 points, or 0.6%, to 35,335.71. The Nasdaq COMP gained 227.99 points, or 1.5%, to 14,942.65, eclipsing its last all-time high set early this month.
Investors will be looking to the Federal Reserve as the Kansas City Feds annual conference in Jackson Hole, Wyoming starts later this week. It will likely provide Wall Street with more insight into what the Fed may do about inflation.
In energy trading, benchmark U.S. crude CLV21 rose 11 cents to $65.75 a barrel. Brent crude BRNV21, the international standard, added 15 cents to $68.90 a barrel.
In currency trading, the U.S. dollar USDJPY edged up to 109.76 Japanese yen from 109.69 yen.