Global shares stepped back on Wednesday as soft U.S. retail sales fuelled worries that rising coronavirus cases could stifle a still fragile economic recovery, dampening the euphoria from vaccine trial breakthroughs.

U.S. S&P500 futures shed 0.4%, a day after the S&P500 index lost 0.48%, while Europe’s Euro Stoxx 50 futures eased 0.3%.

Japan’s Nikkei fell 1.1%, bruised by news that new coronavirus cases in Tokyo hit a record high near 500 and reports that the city may ask businesses to shorten their hours again.

But many Asian markets bucked the trend, with MSCI’s broadest index of Ex-Japan Asia-Pacific shares rising 0.3%, helped by better handling of the pandemic in much of the region and a continued pick up in China’s economic recovery.

“Agile players, including hedge funds, are increasing bullish bets on Asia, probably expecting further momentum in China’s economic recovery,” said Masanari Takada, cross asset strategist at Nomura Securities.

THE THIRD WAVE

The retail sales report released by the U.S. Commerce Department showed spending decelerating as the holiday shopping season approaches, amid a lack of fresh fiscal relief from Washington.

A skittish mood also swept investors as several U.S. states began restricting gatherings and mandating face-coverings after more than 70,000 Americans were hospitalized for treatment of COVID-19.

The surge in new coronavirus cases comes as investors have hailed two promising vaccine trial results published earlier this month.

“We’re are coming out of a solid two weeks so the market being down half a percent isn’t that bad with the prospect of COVID lockdowns,” said Jamie Cox, Managing Partner for Harris Financial Group.

U.S. Federal Reserve Chairman Jerome Powell noted the current surge in coronavirus cases is a big concern, and the economy will continue to need both fiscal and monetary policy support.

“The soft U.S. retail data is showing the impact of dwindling fiscal support. But the inconvenient truth is that governments no longer have lots of money to spend like they did earlier this year,” said a trader at a major Japanese bank.

Bond yields have come down with the 10-year U.S. Treasuries dropping to 0.847%, its lowest level since Nov. 9 and off 7 1/2-month high of 0.975% touched last week.

Falling U.S. yields put pressure on the U.S. dollar, against the yen in particular.

Oil prices eased on a bigger-than-expected build in U.S. crude stockpiles, though hopes that OPEC and its allies will postpone a planned January increase to oil output braked losses. [O/R]