Asian markets started the week on the backfoot on Monday while oil prices slipped as fears of a second wave of coronavirus infections in China sent investors scurrying for safe-havens.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.25% with Australian shares off 0.4% and South Korea slipping 0.6%. Japan’s Nikkei fell 0.75%.

The losses follow a strong rally in global equities since late March, fuelled by central bank and fiscal stimulus and optimism as countries gradually lifted restrictions put in place to curb the spread of the novel coronavirus.

However, risk sentiment took a knock after Beijing recorded dozens of new COVID-19 cases in recent days, all linked to a major wholesale food market.

Investors are also fretting over a spike in cases in the United States.

Another large coronavirus outbreak could roil financial markets, which had been rallying recently on hopes for economic recovery.

Some analysts were still hopeful Monday’s sell-off will be temporary.

“We assume that any second wave is likely to be more manageable than the first given earlier policy experience,” analysts at Morgan Stanley wrote in a note.

“Policy easing will also help Asia (excluding Japan) get back on its feet better.”

The Chinese yuan dipped in offshore trade to 7.0877 per dollar while the risk-sensitive currencies of Australia and New Zealand were also sold off. Both were last down 0.4% at $0.6855 and $0.6424, respectively.

Investors are keeping a close eye on Chinese industrial production and retail sales figures due later in the day for signs of recovery in the world’s second-largest economy.

Elsewhere, the dollar was little changed at 107.46 yen as investors avoided big moves before a Bank of Japan policy meeting ending Tuesday.

No major changes are expected, but some investors may be interested in Governor Haruhiko Kuroda’s views on its yield curve control policy.

U.S. central bankers have discussed the option of adopting yield curve control to cap bond yields.

Analysts said further tests awaited global markets this week – in particular whether re-opening hopes could still push equities higher.

Federal Reserve Chairman Jerome Powell is due to testify before Congress where “he may try to spin a more upbeat/hopeful outlook – but whether markets listen remains to be seen,” said Betashares chief economist David Bassanese.

Also of interest is U.S. May retail sales figures on Tuesday, which are expected to bounce smartly after a slump in April.

“If the market can’t rally on retail sales it will be a strong signal that the initial ‘re-opening bounce’ has finally been priced,” Bassanese added.

“If so, that means going forward economic data – which will provide guideposts on the actual shape of the recovery – will start to matter again.”

In commodities, oil prices slipped with Brent down 2% at $37.95 a barrel while U.S. crude fell 2.7% at $35.26. Gold rose 0.2% to $1,732.2 an ounce on safe haven demand.

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