A man looks at an electronic stock board showing Japan's Nikkei 225 index . AP
Asian share markets began the week with a cautious tone on Monday as the relentless spread of the coronavirus finally made investors question their optimism on the global economy, benefiting safe harbour bonds and crimping oil prices.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.3% and further away from a four-month top hit last week. Japan's Nikkei shed 2.2% and Chinese blue chips 0.9%.
E-Mini futures for the S&P 500 eased 0.2%, while EUROSTOXX 50 futures lost 0.7%. FTSE futures 0.9%.
Wall Street had faltered on Friday as some U.S. states reconsidered their reopening plans. The global death toll from COVID-19 reached half a million people on Sunday, according to a Reuters tally.
About one-quarter of all the deaths so far have been in the United States, with cases surging in a handful of southern and western states that reopened earlier.
"The increase in U.S. COVID-19 infection rates has dented momentum across markets despite the improvements in the global economy, which continues to beat most data expectations," wrote analysts at JPMorgan in a note.
"Our strategists remain sanguine and recommend to buy on dips but also selectivity," they added. "Traditional hedges like JPY vs USD, USD vs EM FX, gold and quality stocks are still outperforming this month. We stay overweight U.S. equities but move EM equities to neutral and stay neutral U.S. credit."
Sovereign bonds benefited from the shift to safety with yields on U.S. 10-year notes falling to 0.64%, having briefly been as high as 0.96% early in June.
The U.S. dollar has generally gone in the opposite direction, rising to 97.461 against a basket of currencies from a trough of 95.714 earlier in the month.
It had less luck on Monday easing back to 107.08 yen, though it remained well within the recent range of 106.06 to 107.63. The euro stood at $1.1240 having found solid support around $1.1167.
It is an important week for U.S. data with the ISM manufacturing index on Wednesday and payrolls on Thursday, ahead of the Independence Day holiday. Federal Reserve Chair Jerome Powell is also testifying on Tuesday.
"U.S. economic data will reinforce that the economy is through the worst of the recession in our view," said CBA currency analyst Joseph Capurso.
"But a double-dip recession is possible if widespread restrictions are reimposed, leading to a surge in the dollar."
In commodity markets, gold held near its highest since early 2012 at $1,773 an ounce.
Oil prices slipped amid concerns the pandemic would slow the reopening of some economies and thus hurt demand for fuel.
Brent crude futures fell 83 cents to $40.19 a barrel, while U.S. crude lost 84 cents to $37.65.
Markets rose last week after unexpectedly strong U.S. jobs data despite some American states reporting record new coronavirus infections.
All major Asian indexes were upbeat with Japan's Nikkei rising 0.1%, China's blue-chip index adding 1.7% while Hong Kong's Hang Seng index climbed 1.8%.
The U.S. currency gained more than 0.2% against a basket of currencies, as risk sentiment soured in early trading in Europe.
London's benchmark FTSE 100 index was up 1.0 per cent, in the eurozone, Frankfurt won 0.9 per cent and Paris climbed 0.8 per cent.
Spot gold was up 0.8% at $2,033.86 per ounce by 0655 GMT, after hitting a record high of $2,036.49. US gold futures rose 1.4% to $2,049.30.
The benchmark Nikkei 225 index slipped 0.26 per cent, or 58.81 points, to end at 22,514.85, while the broader Topix index inched down 0.04 per cent, or 0.55 points, to 1,554.71.
Brent crude was up by 31 cents, or 0.7%, at $44.74 a barrel by 0713 GMT. The contract rose 0.6% on Wednesday to its highest close since March 6. West Texas Intermediate oil was up by 26 cents, or 0.6%, at $41.96 a barrel. The contract ended Tuesday trading 1.7% higher, its highest close since late July.