Asian stocks slip as new COVID-19 strain darkens recovery prospects

HONG KONG/NEW YORK: Asian shares slipped on Tuesday, extending a pullback from multi-year highs hit last week on renewed fears a highly infectious new strain of COVID-19 that shut down much of Britain could lead to a slower global economic recovery.

Australian S&P/ASX 200 widened losses to be down 0.67%. Japan's Nikkei 225 slipped 0.85%.

MSCI's gauge of Asia Pacific stocks outside Japan fell 0.21%. China's benchmark CSI300 Index and Hang Seng Index both opened down 0.2%.

"An escalation of European COVID-19 restrictions in response to fears around a new variant, which is supposed to be faster spreading, should, and did, of course, elicit a negative reaction from prices via the near-term global growth impact," said Stephen Innes, Chief Global Market Strategist at Axi.

"Illiquid conditions will persist through year-end, but dips like this could present more of an opportunity to fade than anything else," he said.

Countries across the globe shut their borders to Britain on Monday due to fears about a new strain of coronavirus, said to be up to 70% more transmissible than the original, causing travel chaos and raising the prospect of food shortages days before Britain is set to leave the European Union.

The discovery of the new strain, just months before vaccines are expected to be widely available, renewed fears about the virus, which killed about 1.7 million people worldwide. As a result European shares fell on Monday in their worst session in almost two months.

Oil prices dropped on expectations of lower demand, with US crude recently down 0.33% at $47.81 per barrel, while Brent was 0.2% lower at $50.81.

US stocks pared much of their early losses during a volatile session on Monday on hopes a long-anticipated stimulus package agreed to by congressional leaders will help spur a stronger recovery.

The S&P 500 ended the day down 0.39% at 3,694.92.

Volatility in US equities jumped in thin holiday trading. The Cboe Volatility Index, known as Wall Street's "fear gauge," notched its largest one-day gain since late October, even though it finished well off its session high.

Spot gold rose 0.3% to $1,881.7 per ounce, with the safe-haven asset hitting a one-month high earlier in the session.