Asia shares pare losses after heavy selling on resurgent Covid-19 fears; STI down 1.5% at midday

TOKYO (BLOOMBERG, REUTERS) - Asian stocks came off their lows on Friday (June 12) after a selloff in the wake of a Wall Street rout triggered by concerns that the epic rally since March was excessive, given the emergence of a second wave of coronavirus infections in the United States.

The still-rising infections added to the Federal Reserve's sobering economic assessment on Wednesday.

Singapore shares plunged at the open with the Straits Times Index sinking 3.4 per cent. The index pared losses to trade down 1.5 per cent by the midday trading break.

Japanese and Australian shares were down about 2 per cent after paring steeper losses. Hong Kong and Shanghai were more modestly lower.

South Korea's Kospi index was down 2.3 per cent, after earlier sinking over 4 per cent. Japan's Nikkei index fell 0.7 per cent while Australia's S&P/ASX 200 Index retreated 1.8 per cent.

Hong Kong's Hang Seng Index dropped 1.3 per cent while the Shanghai Composite Index was 0.3 per cent lower.

US futures suggested some stabilization, rising after the S&P 500 sank almost 6 per cent Thursday, the most in 12 weeks, with only one company in the index finishing higher.

In the US on Thursday, airlines, cruise and travel shares that had soared in recent weeks bore the brunt of the selling. The KBW Bank Index of financial heavyweights slid 9 per cent, and energy producers joined a rout in oil.

While much of the equity selling owed to the frantic pace of the recent rally, sentiment did sour as signs mounted of a possible second wave of the pandemic. Houston, the fourth-largest American city, is girding for a resurgence. Still, Treasury Secretary Steven Mnuchin said the US shouldn't shut down the economy again even if there is another jump in coronavirus cases.

"Certainly there are going to be some second-wave concerns so it is right for the market to be worried about that," Lori Heinel, deputy global chief investment officer, said on Bloomberg TV at State Street Global Advisors. "We also had seen an incredible rally from the bottom so the idea that investors might be looking to take some profits here is certainly what's driving the sell-off as well."

As restrictions lift across the US., more than 2 million people have now been infected. The localized surges have raised concerns among experts even as the nation's overall case count early this week rose just under 1 per cent, the smallest increase since March.

The US Federal Reserve released a gloomy economic outlook at the end of its two-day monetary policy meeting on Wednesday. Chairman Jerome Powell warned of a "long road" to recovery.

Economic data appeared to back up the Fed's projections, with jobless claims still more than double their peak during the Great Recession and continuing claims at an astoundingly high 20.9 million.

US crude slid 1.87 per cent to US$35.66 a barrel, while Brent crude eased 1.43 per cent to US$38 per barrel in Asia on Friday hit by renewed concerns over demand and a large buildup of US crude inventories.

Commodity-linked currencies, the Australian and New Zealand dollars, snapped a three-week run of sharp gains.

In the onshore market, the yuan fell 0.3 per cent, headed for its biggest daily decline since May 27.

The 10-year US Treasury yield edged up slightly to 0.6853 per cent on Friday.

Bond prices were well supported after they rallied following the Fed's commitment on Wednesday to years of extraordinary support to counter the economic fallout from the pandemic.