GLOBAL MARKETS-Asian stocks hit 2-mth lows as Delta variant revives COVID-19 scare

Asian shares stumbled to two-month lows on Friday and were set for their worst weekly performance since mid-May as confidence took a battering over the global spread of the Delta virus variant and worries it could stall a worldwide economic revival. European futures pointed to some stabilisation in the sell-off with Eurostoxx 50 futures and Germany's Dax Futures up 0.4% and London's FTSE futures rising 0.3%.

Asian shares tumbled to two-month lows on Friday and were set for their worst weekly performance since mid-May as confidence took a battering over the global spread of the Delta virus variant and worries it could stall a worldwide economic revival.

European futures pointed to some stabilization in the sell-off with Eurostoxx 50 futures and Germany's Dax Futures up 0.4% and London's FTSE futures rising 0.3%. E-Mini futures for the S&P 500 were a shade higher. The mood in Asia seemed to have improved too by late afternoon, though major indices were still in the red zone.

MSCI's broadest index of Asia-Pacific shares outside Japan went as deep as 665.19, a level not seen since mid-May. It pared some of the losses to be last down 0.3% at 672.29. For the week so far, the index is down 2.6%, the biggest decline since mid-May.

Japan's Nikkei skidded 0.6%. Chinese shares were weaker too with the blue-chip CSI300 index off 0.3%. Australian shares dropped 1.2%, with stay-at-home orders in Sydney, the country's most populous city, tightened further to stop the spread of the Delta variant of the coronavirus.

Analysts said an accumulation of events has triggered a turn in sentiment rather than a single catalyst. Fears central banks will choke economic recovery by tightening policy in their efforts to rein in inflation, a rapidly spreading Delta variant of the coronavirus around the world, and still-low rates of vaccination have darkened the outlook.

Also raising concerns for investors were political tensions in the Middle East, Russia, and China while Beijing's crackdown on foreign-listed Chinese firms took its toll too. As a result, markets are now starting to question one of this year's most successful trades, the so-called reflation narrative -- bets that assets that benefit from a strengthening economy and higher inflation will outperform steadier, safer ones.

Overnight, the yield on 10-year Treasury notes was down 2.8 basis points to 1.293%. It fell as low as 1.25% earlier in the day. The 30-year Treasury bond slipped 1.9 basis points to 1.925%. Inequities, the Dow fell 0.7%, the S&P 500 lost 0.86% and the technology-focused Nasdaq dropped 0.7%.

"The rate move is a reflection of less accommodative Fed signals & some fading of reflation optimism with an uptick in COVID delta concerns," analysts at Bank of America Securities wrote in a note. "We believe these factors may continue to pressure rates lower until the market stabilizes and finds a catalyst for rates to re-price back to levels consistent with fundamentals."

In late Asian trading, yields on the 10-year paper had bounced to 1.329%, though still nowhere close to 2021 highs of 1.776% reached in March. Meanwhile, reading on Thursday on the number of Americans filing new unemployment claims added to views that the job market recovery from the COVID-19 pandemic continues to be choppy.

In currencies, the risk-sensitive Australian and New Zealand dollars were under pressure, down 0.1% each. The safe-haven yen hovered near a one-month high at 110.01 per dollar. The euro dipped to $1.1834.

That left the dollar index, which tracks the greenback versus a basket of six currencies, slightly firmer at 92.452. Gold, another safe-haven asset, was on track for its third straight weekly gain. It was last down 0.1% at $1,800 an ounce.

Oil prices added to overnight gains. Brent crude was up 14 cents to $74.26 a barrel. U.S. crude added 23 cents to $73.17 per barrel.