Asian markets track Wall Street rally but more volatility expected

Equities mostly rose in Asia on Tuesday, with support coming from a Wall Street rally fuelled by merger activity and hopes for a coronavirus vaccine.

After their first two successive weekly losses since March, markets were enjoying a broadly positive start to this one as traders eyed progress in drug trials, with AstraZeneca saying tests on the candidate it is developing with Oxford University could be finished by the end of the year.

And the head of Pfizer said the drug it is working on with BioNTech could be ready for distribution within months.

"Financial markets remain optimistic a vaccine will get done before the year is over," said OANDA's Edward Moya.

However, the World Health Organization's European chief Hans Kluge sounded a sober note about the fight against the disease.

"I hear the whole time: 'the vaccine is going to be the end of the pandemic'. Of course not," he warned, saying the end of the pandemic would come when communities learn to live with the disease.

Kluge also told AFP on Monday that the autumn will be "tougher" with "more mortality".

Hong Kong and Shanghai rose. Traders cheered data showing China's retail sales -- a key gauge of the crucial domestic consumer sector -- rose for the first time since the pandemic struck, beating expectations.

There was also a forecast-beating pick-up in industrial output.

The readings indicate the world's number-two economy is gradually recovering from the impact of virus lockdowns.

Seoul, Mumbai, Singapore, Taipei, Manila and Bangkok also rose, though Tokyo, Sydney and Jakarta edged down.

London, Paris and Frankfurt all rose in opening trade.

But analysts warned that further ups and downs were to be expected

"Market volatility is returning after months of steady advances in risk assets," BlackRock Investment Institute strategists said.

"Valuations have risen, and we could see greater volatility as a result, especially as the US election closes in."

On currency markets, the pound remained under pressure as Britain and the European Union sparred over Prime Minister Boris Johnson's legislation that would break the Brexit deal signed earlier this year, with regard to several key areas related to Northern Ireland.

MPs passed the bill at its first reading Monday night but Johnson faces a rebellion within his own Conservative party, fuelling uncertainty in Britain's already beleaguered economy.

"Tensions within the UK Conservative party over the PM's internal market bill continue to fester," said Stephen Innes at AxiCorp.

"There will likely be no clarity on Brexit well into November or even December, suggested by the latest sharp deterioration in the tone of negotiations."

Innes added that expectations London and Brussels will eventually broker some sort of trade agreement -- citing brinkmanship on the British side -- is keeping sterling supported.

However, he said: "What is the timeline now? Brexit negotiations have not been formally suspended though it is hard to see much of anything getting when the chief negotiators are engaged in foul-tempered Twitter exchange."