Reuters - Asia stock markets fell Thursday - but not as bad as Wall Street's selling overnight.
Oil futures prices bounced off lows and U.S. stock futures jumped, as Asia's brighter economic outlook offset market participant worries about fresh COVID-19 lockdowns in Europe.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1%. Japan's Nikkei fell 0.8% and drops in Hong Kong, Sydney, Shanghai and Seoul were smaller than 1.5%.
The S&P 500 index's fell 3.5% overnight and Germany's DAX, which led European shares to their lowest level since late May, took a 4.2% swim.
S&P 500 futures and Dow futures rebounded 1%, which traders attributed to heightened volatility and to the less gloomy mood around Asia as China's economy builds up steam.
"Asia is not really partaking in this second or third wave story because it's got its COVID largely under control," said Rob Carnell, chief economist in Asia at Dutch bank ING.
"As a result, domestic economies look reasonable. Exports will remain soft...but domestically they are still doing OK and doing a lot better relative to (Europe and the U.S.)."
Oil rose from a four-month low overnight and the risk-sensitive Australian and New Zealand dollars rose about a quarter of a percent.
Still, both currencies are, for now, headed for a weekly loss against the dollar and so is the euro, as worries about the new lockdowns seemed to catch market participants by surprise.
In France, people will be required to stay in their homes from Friday, except to buy essential goods, seek medical attention or exercise. Germany will shut bars, restaurants and theatres from Nov. 2-30.
"Until yesterday the market was traveling with the hope the improvement of health care services in dealing with the pandemic would prevent the introduction of severe lockdowns," National Australia Bank FX strategist Rodrigo Catril said.
"At least in Europe, this dynamic has now changed...the question now is whether U.S. states will follow."
Central bank meetings and economic data are the main focus later Thursday, with gathering uncertainty about the U.S. Nov. 3 election also keeping market participants on edge.
The Bank of Japan is set to maintain its massive stimulus program and vow to take further action if the virus' economic fallout threatens a return to deflation.
Market participants expect the European Central Bank to hold off on new measures and instead hint at action in December, which is likely to keep a lid on the euro.
The common currency hit a 10-day low on the dollar and a hundred-day low on the yen overnight, before recovering slightly. It last bought $1.1751.
German unemployment and inflation data, European confidence surveys and advance U.S. Gross domestic product figures will also be closely watched - with the U.S. figure likely to show record growth, but still leave the economy behind where it began 2020.
"Any disappointment in these numbers may have a magnified market impact, given the current weakness," said CMC Markets' Sydney-based strategist, Michael McCarthy.
Market participants are also increasingly wary of a contested U.S. election result that could unleash a wave of risk-asset selling.
Wall Street's "fear gauge," the Cboe Volatility Index surged Wednesday to its highest level since June and a jump in implied currency volatility indicates that a wild ride is expected.
One-week yuan implied volatility hit a five-year high Thursday.
The U.S. bond market, however, was somnolent as market participants looked past polling day and figured huge government borrowing for coronavirus relief spending will happen no matter who wins.
Benchmark U.S. 10-year yields rose overnight and added about a basis point Thursday to 0.7894%.
"Looking ahead, heightened volatility in the run-up to the election and even, potentially, following the election will eventually subside," said Seema Shah, chief strategist at Principal Global Market participants.
"Markets will soon reassert a trajectory determined by fundamentals, rather than election news flow."
