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Asia Stocks Struggle as Beijing Reports Rise in COVID-19 Cases

Stocks in Asia were little changed in Wednesday morning trade as the International Monetary Fund said the global economy is set to see a more significant contraction than it previously forecast.

Mainland Chinese stocks were largely flat in early trade, with the Shanghai composite and Shenzhen component little changed. Hong Kong’s Hang Seng index edged 0.21% higher. 

In Japan, the Nikkei 225 shed 0.6% in morning trade while the Topix index declined 0.41%. Japan’s exports plunged 28.3% year-on-year in May, according to provisional trade statistics released Wednesday by the country’s Ministry of Finance.

Over in South Korea, the Kospi dipped fractionally. Meanwhile, the S&P/ASX 200 in Australia added 0.18% Overall, the MSCI Asia ex-Japan index traded 0.15% higher.

IMF Chief Economist Gita Gopinath said in a Tuesday blog post that “the forthcoming June World Economic Outlook Update is expected to show negative growth rates even worse than previously estimated.” The fund also said the current crisis, which it dubbed the Great Lockdown, is “unlike anything the world has seen before.”

Authorities have imposed lockdown measures to curb the spread of the coronavirus pandemic, leaving most economies essentially frozen. While many countries have begun to ease these measures, it has proven challenging given the looming threat of a potential resurgence in Covid-19 cases.

Meanwhile, trial results announced Tuesday showed dexamethasone — a widely available drug — can help critically ill coronavirus patients. The treatment reportedly reduced Covid-19 deaths in hospitalized patients by up to one third. Globally, more than 8 million people have been infected by the virus while at least 438,171 lives have been taken, according to data compiled by Johns Hopkins University.

Investors also continued to watch for developments on the geopolitical front regionally, as tensions escalate along the Korean peninsula after North Korea reportedly destroyed a liaison office with the South.

Certain Asia-listed defense stocks soared on the back of that development, with Ishikawa Seisakusho jumping 9.79% while Victek in South Korea skyrocketed more than 22%.

South Korean stocks exposed to North Korea, on the other hand, fell: Hanil Hyundai Cement and Hyundai Elevator tumbled 4.52% and 4.05%, respectively. The South Korean won also weakened against the dollar, last trading at 1,214.46 after weakening from levels below 1210 yesterday.

Elsewhere at the Himalayan border, Indian and Chinese troops clashed this week as the two sides remained in conflict, according to a Reuters report. Since early May, hundreds of soldiers have been in a faceoff at three locations, with each side accusing the other of trespassing, the report said.

Overnight on Wall Street, the Dow Jones Industrial Average closed 526.82 points higher at 26,289.98. The S&P 500 gained 1.9% to end its trading day at 3,124.74 while the Nasdaq Composite closed 1.8% higher at 9,895.87. It was the third straight gain for the major averages.

Oil prices fell in the morning of Asian trading hours, with international benchmark Brent crude futures down 1.56% to $40.32 per barrel. U.S. crude futures also slipped 2.01% to $37.61 per barrel.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 97.034 after touching levels around 96.5 earlier.

The Japanese yen traded at 107.25 per dollar after seeing levels around 107 earlier in the trading week. The Australian dollar changed hands at $0.6866 after slipping from levels above $0.693 yesterday.