Markets fell in Asia on Tuesday with investors looking for their next buying catalyst after the latest rally, while there were also concerns about fresh coronavirus flare-ups and the reimposition of restrictions in parts of the world.
With news of President Joe Biden's bipartisan infrastructure deal having run its course and inflation worries continuing to linger, traders are choosing to sit tight ahead of key United States (US) jobs data later in the week and the beginning of corporate earnings season next month.
Still, analysts said that despite a pause in the latest run-up, the outlook for equities remained positive as vaccines are rolled out globally.
The Nasdaq and S&P 500 each clocked up from records Monday, helped by a fresh bump in tech firms.
But Asia was unable to follow suit, with eyes on the spread of the coronavirus.
With the more contagious Delta virus variant sending infection rates soaring, several governments are being forced to act to prevent another deadly wave of the disease.
In Australia, the cities of Sydney, Perth, Brisbane and Darwin have all been put into lockdown, with leaders in the country also struggling to get its inoculation programme up to speed.
The disease has also led to similar measures in South Africa, while Russia, parts of Asia, Europe and South America have also witnessed worrying spikes.
Meanwhile, a surge in Britain, which has one of the most successful vaccination rollouts in the world, has led to a number of other countries to ban flights from there or put-up strict quarantine rules.
The developments have raised concerns that the forecast global recovery could be knocked off course or at least slowed.
"COVID has a big role to play internationally," JoAnne Feeney, at Advisors Capital Management, said.
But she added: "The US is the first out of the gate with high levels of vaccinations for a large country, we should see that continuing."
The rebound was expected to start in the United States before "spreading around the world", she said. "The reflation trade is taking a bit of a pause, but it doesn't mean it's over."
Tokyo, Hong Kong, Sydney, Seoul, Singapore, Shanghai and Manila all fell, though there were small gains in Wellington, Taipei and Jakarta.
"Concerns around the Delta variant have grown... though vaccine efficacy has been proven, with the most immediate implication being that a greater percentage of the population will need to be vaccinated (80 percent, including children) due to its higher infection rate," said National Australia Bank's Tapas Strickland.
"With vaccine efficacy proved, markets can continue to look through to the other side of the pandemic and it is notable that even with Delta variant fears, the S&P 500 rose to a new record high."
Oil prices extended the previous day's sharp losses that were driven by concerns that the fresh lockdowns will dampen demand.
Brent dropped two percent Monday and WTI fell 1.5 percent, though they are both sitting at multi-year highs and observers remain optimistic they will continue to rise over the coming months as the recovery progresses.
The drops also came on the back of bets that OPEC and other major producers will decide to lift output at their meeting this week. – AFP