Asian markets follow the previous day's sharp drop. File photo

Asian markets were mixed on Wednesday following the previous day's sharp drop, with optimism about the reopening of economies clouded by concerns about fresh spikes in infections around the world.

A string of positive indicators from China to the US in recent weeks — as well hopes for a vaccine and the easing of lockdowns around the world — has added fuel to a global rally that has lifted equities out of the March depths.

But while investors are generally upbeat that the world economy will recover from an expected recession this year, the ongoing spread of coronavirus continues to act as the terrifying backdrop that keeps them in check.

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Adding to the unease are ongoing tensions between China, the US and several other nations over Beijing's imposition of a security law in Hong Kong.

And Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, fanned concerns about the US rebound by warning in a Financial Times interview that key data indicated a "levelling off" of economic activity.

Hong Kong rose 0.6 percent and Shanghai was up 1.7 percent, while Singapore added 0.1 percent and Jakarta piled on 1.8 percent. There were also gains in Manila and Taipei.

Picture shown is for illustrative purposes only.

But Tokyo finished 0.8 percent lower, while Seoul fell 0.2 percent and Wellington slipped 0.3 percent with Mumbai and Bangkok dropping 0.1 percent each.

Sydney sank 1.5 percent, with Australian traders spooked by the decision to impose a six-week lockdown in the second-biggest city of Melbourne -- a major contributor to the national economy -- as it struggles to control a new outbreak of the disease.

Gold closes in on $1,800

After "a five-day rally where the market's up quite a bit, it's not so surprising to have a little bit of a pause", Jeff Mills, at Bryn Mawr Trust, said.

"It's just sort of the natural movements of the market. You can't go up in a straight line every single day."

And Stephen Innes at AxiCorp added: "As summer trading gets under way, investors are more prone to book profits and move to the sidelines."

While the virus is the major weight around traders' necks, they are also having to contend with other risk factors.

Image only for representation

Bloomberg News reported that discussions had been held within the Trump administration on the possibility of undermining the decades-old US-Hong Kong dollar peg as part of an effort to hit back at China over the controversial new law in the city.

However, analysts said such a move was unlikely as it could put US assets held by China such as Treasuries at risk, while it would also send shockwaves through equity markets, a scenario Donald Trump would want to avoid ahead of a US presidential election.

The Hong Kong dollar did not appear to show any weakness in light of the report and it remains wedged at its strongest possible level against the dollar.

But the uncertainty on markets has pushed investors to seek out safe-haven assets, with gold within spitting distance of the $1,800 mark not seen since November 2011.

London's FTSE fell in the morning as traders in the capital awaited a mini-budget by Chancellor Rishi Sunak, who is expected to unveil a multi-billion-pound programme to support the languishing British economy.

Paris and Frankfurt were also lower.

Key figures around 0810 GMT

Tokyo - Nikkei 225: DOWN 0.8 percent at 22,438.65 (close)

Hong Kong - Hang Seng: UP 0.6 percent at 26,129.18 (close)

Shanghai - Composite: UP 1.7 percent at 3,403.44 (close)

London - FTSE 100: DOWN 0.4 percent at 6,166.52

West Texas Intermediate: DOWN 0.2 percent at $40.54 per barrel

Brent North Sea crude: DOWN 0.1 percent at $43.02 per barrel

Euro/dollar: UP at $1.1287 from $1.1271 at 2040 GMT

Dollar/yen: DOWN at 107.50 yen from 107.54 yen

Pound/dollar: UP at $1.2550 from $1.2541

Euro/pound: UP at 89.92 pence from 89.87 pence

New York - Dow: DOWN 1.5 percent at 25,890.18 (close)