Asian shares turn red as Hong Kong tumbles on China virus

Asian shares erased earlier gains on Wednesday, swinging into negative territory as a spike in new Chinese virus cases sent Hong Kong stocks tumbling and fuelled fears about the economic impact of the outbreak.

MSCI's broadest index of Asia-Pacific shares outside Japan skidded 0.52%. Hong Kong shares fell 2.8% on their first session after a two-and-a-half trading day break for Lunar New Year, led by declines in financial services, real estate, and consumer goods companies.

However, Australian shares rose 0.57%, while Japan's Nikkei stock index advanced 0.4%, partly because investors in these markets have already had a chance to react to the virus outbreak, which has claimed more than 100 lives.

US stock futures rose 0.14% in Asia on Wednesday. The S&P 500 rose 1.01% on Tuesday, rebounding from its worst daily decline in four months on Monday, as shares of Apple Inc rose ahead of its fourth-quarter results.

After the market close, Apple reported better-than-expected profits for the fourth quarter and forecast revenue in the current quarter above Wall Street expectations, which lifted some Asian tech shares.

The yield on benchmark 10-year Treasury notes rose to 1.6666% versus a yield of 1.5821% on three-month Treasury bills in another sign that sentiment has stabilised.

The yield curve briefly inverted on Tuesday when 10-year yields fell below their 3-month counterparts for the first time since October. An inverted yield curve has historically been an indicator of looming recession.

Markets in Asia are likely to be subdued before the US Federal Reserve meeting later on Wednesday. The Fed is expected to reiterate its desire to keep rates unchanged at least through this year.

In currency markets, the safe-haven yen was quoted at 109.22 per dollar following a 0.2% loss on Tuesday. The Swiss franc, another popular safe-haven, traded at 0.9740 versus the dollar, close to its lowest in almost three weeks.

In the offshore market, the yuan was little changed at 6.9615 per dollar. China's onshore markets are closed for the Lunar New Year holidays. Markets will resume trading on Feb. 3.