Asian markets mostly fell Tuesday following a sharp pullback on Wall Street as investors were spooked by a coronavirus surge, new lockdowns, a slow vaccine rollout and uncertainty over US Senate elections.

While analysts are broadly upbeat about the long-term outlook this year, the nascent inoculation programmes have yet to have an impact, meaning the first few months of the year will likely be bumpy.

And the task ahead was laid bare by data showing almost 280,000 Americans were infected in one day, while the country's death toll passed 300,000.

And as a new, potentially more transmissible strain rampages around the world, governments are being forced to tighten containment measures again, with England going into a six-week full lockdown after officials warned hospitals could soon face collapse.

Such measures are fuelling concerns the already stuttering economic recovery could be jolted off course in the first quarter, while the rollout of vaccines has been slower than hoped, adding to the market jitters.

"The first quarter will no doubt be tough; the spread has been horrific throughout the festive period and restrictions are being tightened and extended," said Craig Erlam, senior market analyst at OANDA.

"The toll on the economy will be significant but, thanks to the vaccine, consigned mostly to the first quarter."

All three main indexes on Wall Street fell more than one percent, having ended 2020 at or near record highs, with dealers there also keeping tabs on runoff senate elections in Georgia, which will decide the balance of power in the upper house of Congress.

Both Democratic candidates hold narrow leads going into the vote Tuesday, and observers said there are concerns on trading floors that a win for the party would give them control of Capitol Hill and power to pass market-unfriendly measures such as tax hikes and tighter regulation.

Markets have been buoyed in recent months by the prospect of Republicans holding the Senate and provide a check on the Democrats but analysts said a "blue wave" scenario has spooked investors.

"To date, investors are comfortable with a Republican-controlled Senate that would offer a balance against the potentially more progressive agenda of the Democrats under President-elect (Joe) Biden," said Axi strategist Stephen Innes.

"If the Democratic Party... (controls) both houses, we could see an equity market correction, especially if investors worry that such checks and balances around tax and tech regulation will disappear.

"This will have an important impact on the expansiveness or limits on the Biden presidency over the next two years. The bottom line is the market hates uncertainty."

However, Gorilla Trades strategist Ken Berman added: "Most analysts agree that a Democratic sweep would pose a risk for stocks, but with all the positive trends in mind, it's unlikely that bulls will have to deal with anything more than an orderly correction in stocks."

Asian equities struggled Tuesday. Tokyo, Hong Kong, Sydney, Seoul, Singapore, Shanghai, Manila and Jakarta all fell, though there were gains in Taipei, Bangkok and Wellington.

US senate vote
Traders are concerned that a win for Democrats in Georgia's senate runoff elections could give the party and Joe Biden power to introduce measures such as tax hikes and tough regulation Photo: AFP / JIM WATSON

But analysts remain upbeat about the future.

"The light at the end of the tunnel is there for all to see and it grows brighter by the week," said Berman.

"There have been setbacks -- new variants, for example -- which are undoubtedly a blow and there may be more. But as things stand, there's plenty of reason for optimism this year, which will make a nice change compared to the one we've just slammed the door shut on."

Oil prices edged up slightly but remained under pressure from immediate worries about demand as containment measures go into force, while dealers were also fretting after a meeting of OPEC and other top producers ended without agreement on new output levels for next month.

Bitcoin was sitting at $32,400 after seeing recent wild swings, that saw it hit a record near $35,000 before diving to $28,000 within the space of a day.

Tokyo - Nikkei 225: DOWN 0.1 percent at 27,232.38 (break)

Hong Kong - Hang Seng: DOWN 0.5 percent at 27,341.25

Shanghai - Composite: DOWN 0.2 percent at 3,497.54

Pound/dollar: UP at $1.3577 from $1.3575 at 2200 GMT

Euro/pound: UP at 90.32 pence from 90.20 pence

Euro/dollar: UP at $1.2262 from $1.2243

Dollar/yen: UP at 103.17 yen from 103.14 yen

West Texas Intermediate: UP 0.3 percent at $47.76 per barrel

Brent North Sea crude: UP 0.2 percent at $51.19 per barrel

New York - Dow: DOWN 1.3 percent at 30,223.89 (close)

London - FTSE 100: UP 1.7 percent at 6,571.88 (close)

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