Surging virus cases have forced key economies including France to go into another lockdown, fanning fears about their stuttering recovery

Hong Kong (AFP) - Asian markets mostly rose Wednesday but investors were shifting cautiously as they weighed hopes for a virus vaccine against surging infections around the world that threaten an already stuttering economic recovery.

While the mood on trading floors remains broadly optimistic about the long-term outlook, analysts said the coronavirus will continue to cause worry, while the head of the Federal Reserve warned of a “challenging” few months ahead.

Joe Biden’s election win – paving the way for a less bombastic presidency – and news that trials indicated two vaccine candidates had proved to be hugely successful have helped global markets bounce back strongly from a painful October.

The breakthroughs by Pfizer and BioNTech, and Moderna a week later, have fanned hopes that life can begin to return to normal from the start of next year, particularly giving a boost to travel and tourism stocks.

And Pfizer boss Albert Bourla on Tuesday provided more optimism when he said its drug had passed a key safety milestone, meaning it could now seek emergency-use authorisation from US regulators.

“Overall risk sentiment could yet be sustained with more vaccine headlines likely over coming days,” said National Australia Bank’s Tapas Strickland.

“Oxford/AstraZeneca results are said to be ‘imminent’ and if similar to the efficacy seen in the other candidates will be important given the amount of shadow production and supply agreements undertaken by AstraZeneca.”

Hong Kong, Shanghai, Singapore, Sydney, Seoul, Taipei, Jakarta and Manila all rose.

But after a healthy rally over the past 10 trading days, investors are taking a step back, with Wall Street’s three main indexes all edging lower Tuesday.

Tokyo, Wellington, Mumbai and Bangkok also fell in Wednesday trade. London, Paris and Frankfurt all fell soon after opening.

- ‘Challenging’ outlook -

Raging Covid-19 cases across the US and Europe – and a pick up elsewhere including Japan and South Korea – are of immediate concern, analysts said.

Traders are also growing worried that US lawmakers are not doing enough to agree on a new, much-needed stimulus for the world’s top economy as it shows signs of slowing in the face of the new wave of infections.

Months of talks ahead of the November 3 election failed to reach a breakthrough, and Republicans who are likely to keep power in the Senate show no signs of backing down to Democrat demands for a multi-trillion-dollar package.

“With the election uncertainty out of the way it’s about Covid; we’ve seen this exponential growth in cases,” David Kudla, CEO of Mainstay Capital Management CEO.

With no rescue package on the horizon, hopes are that the Fed will step in at its next meeting and ramp up its bond-buying monetary easing programme.

Reserve boss Jerome Powell warned Tuesday that “with the virus now spreading at a fast rate, the next few months may be very challenging”.

“So it’s probably too soon to say with any confidence what the impact on the path of the economy will be from the vaccines,” he added.

China-US tensions remain a concern, with American regulators pushing ahead with a plan that could see Chinese firms delisted from US exchanges if they do not comply with auditing rules, Bloomberg News reported.

Eyes are also on long-running talks between Britain and the European Union after reports the two were inching towards a post-Brexit trade agreement with just over a month to go until their December 31 deadline.

The pound is holding recent gains on hopes officials can find common ground on key sticking points such as access to fishing waters, though there remain reservations about the prospects for a deal.

“There are hopes of a deal being reached as early as next week,” said Axi strategist Stephen Innes.

“However, a government spokesperson cautioned that the UK PM (Boris Johnson) would not accept an agreement that compromises its core principles around sovereignty over laws, borders, money, and fish.”

- Key figures around 0820 GMT -

Tokyo - Nikkei 225: DOWN 1.1 percent at 25,728.14 (close)

Hong Kong - Hang Seng: UP 0.5 percent at 26,544.29 (close)

Shanghai - Composite: UP 0.2 percent at 3,347.30 (close)

London - FTSE 100: DOWN 0.5 percent at 6,336.09

Euro/dollar: UP at $1.1884 from $1.1862 at 2220 GMT

Pound/dollar: UP at $1.3281 from $1.3254

Dollar/yen: DOWN at 103.88 yen from 104.17 yen

Euro/pound: UP at 89.49 pence from 89.47 pence

West Texas Intermediate: FLAT at $41.44 per barrel

Brent North Sea crude: UP 0.3 percent at $43.88

New York - Dow: DOWN 0.6 percent at 29,783.35 (close)