Global stocks sink deep into red as second wave fears bite
Global stocks plunged further into the red this afternoon as fears of a second wave of the pandemic mounted and investors worried about a slowdown in the global economic recovery.
The FTSE 100 closed down 3.11 per cent as growing numbers of new infections compounded fears over a second wave of cases, sending jitters through equity markets.
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The FTSE 100’s losses follow some concerning coronavirus case figures from the US, with seven states reporting record Covid-19 hospitalisations.
US stocks opened markedly lower while European markets spent the session in the red as concerns of a transatlantic trade dispute grow.
FTSE 100 drops as experts warn of second wave risk
UK health experts today called for an urgent review to prepare the public for a second wave of Covid-19 infections.
In an open letter, the experts pressed the government to act in order to prevent more coronavirus deaths and economic damage if a second wave occurs during winter.
The smaller, domestically-focused FTSE 250 also tumbled into the red, and finished the session down 2.84 per cent.
Housebuilder Crest Nicholson fell to the bottom of the mid-cap index, shedding as much as 18 per cent after announcing a grim forecast for the year.
The company posted a loss before tax for the first half, and said it expected annual adjusted pretax profit to fall around 60 to 70 per cent due to disruptions caused by Covid-19.
Read more: US mulls $3.1bn of new tariffs on UK and European goods
European shares tumble as US mulls new tariffs
The FTSE’s European peers also sank into the red, with Germany’s DAX shedding 3.2 per cent and France’s CAC 40 dropping 2.82 per cent.
It came after news that the US is mulling new tariffs on $3.1bn of exports from the UK, France, Germany and Spain.
The US Trade Representative (USTR) is looking to increase tariffs on European exports, including olives, beer and gin, in what could lead to further trade disputes this summer.
The USTR has launched a month-long comment period on the proposals, which will end on 26 July.
Like FTSE traders, European investors were also shaken by mounting concerns of a second coronavirus wave.
“Momentarily granted some relief thanks to Tuesday’s largely better than forecast flash PMIs, Europe cliff-dived back into the red on Wednesday as the Covid-19 situation in the US grew increasingly grim,” said Spreadex analyst Connor Campbell.
“It may feel like in the UK that, following Boris Johnson’s announcement of a large swathe of lockdown-easing measures from 4 July, we are out the other side of the pandemic,” he continued. “All evidence would suggest that isn’t the case.”
Read more: Asian stocks pass four-month high despite rising coronavirus cases
Asian stocks traded slightly higher on Wednesday to touch a four-month high, with investors remaining stubbornly optimistic about the prospect of re-opening the global economy, even as coronavirus cases looked to be accelerating to new peaks.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5 per cent to reach its highest since pandemic lockdowns first hammered markets in early March.
Wall Street slumps amid flaring coronavirus cases
Wall Street’s three major indices slumped on open as investors weigh up the possible economic impact of spiking coronavirus cases in several US states.
Top US infectious disease official Dr Anthony Fauci warned that there was a “disturbing” rise in the number of new coronavirus cases in some states.
Fauci said that the next two weeks could be critical in containing the outbreak.
The Dow Jones sat 1.95 per cent lower by mid afternoon, while the S&P 500 fell 1.78 per cent lower. The Nasdaq, which has reached all-time highs following a raft of stimulus measures, slipped 1.4 per cent.
The S&P 500 and Dow Jones Industrials are now around seven per cent and 11.5 per cent from their respective February record closing highs.
“Coming off the back of a huge market recovery in the months following the March low, we are finally seeing markets wake up to the obvious risks of getting too carried away at the first sign of a recovery,” said Joshua Mahony, senior market analyst at IG.
“We are used to the Federal Reserve or Trump administration stepping in at every turn, but that reliance is certainly not A healthy reason to buy stocks.”
Wall Street could also face even steeper losses as equity markets rebalance ahead of quarter-end next week.
“With the S&P 500 currently up over 20% since the end of March, there is a clear requirement to shift a huge amount of assets out of stocks and into bonds in a bid to re-balance portfolios back into their desired bonds/equity split,” Mahony added.