Asian stocks approach week-long highs, but Delta’s issues increase

SYDNEY, Aug.4 (Reuters) – Asian stocks hit weeklong highs on Wednesday, in large part on strong U.S. corporate earnings, although the mood remained cautious as the Delta variant of the rapidly spreading coronavirus darkens the global economic outlook.

The largest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) climbed 0.1% to its highest level since July 26.

The Japanese Nikkei (.N225) was in the red, as were Chinese stocks with a blue chip index (.CSI300) down 0.2%.

Australian stocks (.AXJO) were a little firmer, but sentiment was marred by a steady rise in Delta infections in Sydney, the country’s largest city.

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According to National Australia Bank economist Tapas Strickland, nearly 90% of companies listed on the S & P500 reported positive earnings surprises for the second quarter.

Analysts have warned of an increase in Delta coronavirus infections in Asia, however, with Chinese media reporting that 31 provincial regions have warned residents against unnecessary travel in light of recent outbreaks.

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“Wuhan has started city-wide testing in a strange echo of the original COVID-19 outbreak,” Strickland said.

“While China’s determination to control outbreaks has been well illustrated, markets will continue to monitor the outbreak given the high transmissibility of the Delta variant. There are also concerns that China’s national vaccines may be less effective against the Delta variant. “

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The S&P 500 (.SPX) gained 0.8% to close at 4,423.15 – another closing high – while the Dow (.DJI) rose 0.8% and the Nasdaq (.IXIC) gained added 0.6%.

Investors expect volatility to increase in August as more companies report earnings and the market hears from Federal Reserve officials in the coming weeks. US non-farm payroll numbers are due Friday.

The US dollar eased against the Japanese yen and Swiss franc as questions about slowing US economic growth and the Delta variant challenged risk appetite.

The dollar was near a two-month low against the yen at 108.95. Against the Swiss franc, the dollar hovered near its lowest since mid-June at $ 0.9038.

The New Zealand dollar soared after very strong employment data cemented expectations of an interest rate hike this month. The kiwi climbed to NZD 0.7046 = D3, a gain of 1% for the week so far.

The risk-sensitive Australian dollar was relatively bullish at $ 0.7396, but that was largely due to a positive economic assessment by the country’s central bank on Tuesday.

In commodities, Brent futures fell 20 cents to $ 72.21 a barrel. US crude came in at 32 cents at $ 70.24 a barrel.

Spot gold was flat at $ 1,810.4 an ounce.

Reporting by Swati Pandey in Sydney; edited by Richard Pullin

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