Asia: Stocks drop as virus spikes, China data fails to lift gloom

[HONG KONG] Asian markets fell on Thursday as investors fretted over fresh spikes in virus infections around the world and the reimposition of lockdowns, while forecast-busting economic growth data out of China was unable to break through the unease on trading floors.

While markets have been rallying since hitting their low points in March - thanks to government support and the easing of lockdowns - traders have had to juggle hopes for economic recovery with the reality of a deadly virus that is sweeping the globe and seeing fresh spikes in some countries.

Geopolitical tensions, particularly between China and the United States, were also fanning uncertainty.

Beijing said the world's top economy expanded 3.2 per cent in the second quarter, much better than the 1.3 per cent tipped in an AFP poll of economists, indicating China is well on the road to recovery after months of lockdowns that caused a first-quarter contraction.

However, while the reading was welcomed, analysts said investors had largely priced a recovery into prices and pointed to a worse-than-expected drop in retail sales in June - a small rise had been forecast - suggesting consumers are still reticent about spending.

The retail sector has taken on an increasingly crucial role in China's economy as leaders look for consumers, rather than trade and investment, to drive growth.

"No matter how much stimulus and fiscal sugar you try to entice consumers with, they will not leave their apartment and go on a spending spree until they feel confident the landscape is virus-free," said AxiCorp's Stephen Innes.

In early trade, Shanghai and Hong Kong were down one per cent apiece, while Tokyo fell 0.5 per cent and Sydney shed 0.4 per cent.

Seoul dropped 0.7 per cent and Singapore was off 0.3 per cent while Wellington and Taipei were also in the red.

Investors are growing increasingly worried about a surge in infections in several countries that had been reopening their economies confident they had controlled or tempered their outbreaks.

California has reimposed containment measures including closing bars and restaurants in the richest US state, while others have followed similar measures.

Elsewhere, the easing of lockdown restrictions seen as key to kick-starting economic recoveries were being reversed or put on hold, such as in Hong Kong, Australia, Japan and India.

AFP