Merkel and Biden Dampen Global Markets

Asian markets extended losses Wednesday as renewed virus and vaccine fears returned to haunt investors as Europe faces a fresh spike in infections and lockdowns that could knock the economic recovery off course.

After several weeks of worrying that an expected resurgence in global growth will fan inflation and force central banks to hike interest rates, the fear of another Covid wave has returned with gusto.

Europe's two biggest economies, Germany and France, as well as a number of other countries, have been forced to reimpose new restrictions to battle the disease, at the same time as they struggle to get their vaccination programmes rolling properly.

"Covid-19 cases continue to resurge in continental Europe, so their double-dip recession persists as they continue to argue about vaccinations and why they are lagging behind the US and Britain in vaccination rates," said markets strategist Louis Navellier.

Hong Kong was among the biggest losers, dropping 1.7 percent after news that the government had suspended its Pfizer/BioNTech vaccine programme over concerns about packaging, dealing a blow to the city's already slow inoculation programme. Nearby Macau also halted jabs.

Tokyo shed 1.8 percent, while Shanghai, Seoul, Singapore, Taipei, Manila, Jakarta, Bangkok and Wellington were also well in the red. Sydney was slightly higher.

"Concerns regarding the strength of the post-pandemic recovery with cases remaining elevated in many jurisdictions and fresh mobility restrictions continue to rock the boat," said Axi strategist Stephen Innes.

"The pattern, in general, has been for the markets to pare back on initial lockdown announcements but then to recover, though there are worries at the moment about a lagged rise in US Covid cases to follow Europe's."

US Treasury yields were lower as investors sought out the safe haven -- yields go in the opposite direction to prices -- providing respite from a recent increase that had led to worries about a hike in interest rates from the record lows that have been a key pillar of support to a year-long equity rally.

Federal Reserve boss Jerome Powell and Treasury Secretary Janet Yellen on Tuesday reiterated their view that while inflation is expected to spike as the economy recovers, it will not likely remain elevated and if it does they would be at hand to tame it.