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Stocks sink on virus, trade war concerns

By AFP - Jun 24,2020 - Last updated at Jun 24,2020

People walk by the New York Stock Exchange as Manhattan enters Phase 2 of reopening on Monday, in New York City (AFP photo)

LONDON — European and US stock markets sank on Wednesday as investors worried over rising coronavirus infections in several countries and fresh trade tensions between the European Union and the United States, dealers said.

Also, updated IMF economic forecasts hit at sentiment as the institution sees the global economy contracting by 4.9 per cent this year due to the shutdowns of transport and production meant to halt the transmission of the virus.

As for the increasing trade tensions, the US said it is considering new taxes on $3.1 billion in European imports amid a dispute over subsidies to aircraft manufacturer, Airbus, just days after the EU indicated it plans to move forward on a digital tax that would primarily hit US tech titans.

In afternoon trading, European indices had slumped into the red, while Wall Street also opened lower. 

“Today we have the combination of rising coronavirus cases in various countries, including the US and Germany, which naturally casts doubt over the ability of countries to continue to reopen and people’s willingness to ease their way back to something that resembles normal life,” OANDA analyst Craig Erlam told AFP.

“Both of these are a considerable threat for businesses and employment. Add to that the trade aggression from the US towards Europe at the worst possible time... and investors are understandably unsettled.”

Erlam added: “Whether that lasts is another thing. The [economic] stimulus trade is powerful as we have seen repeatedly.”

While governments and central banks have provided a wall of cash to support markets, investors are nevertheless walking a tightrope between hopes the easing of restrictions will lead to a rebound and the possibility that the relaxation will inflame the pandemic again.

There are growing concerns of a relapse in some countries, with Tokyo Governor Yuriko Koike warning a number of new cases had been found at one workplace.

That comes after Germany reimposed containment measures in two western districts — home to almost 640,000 people — after an outbreak at a slaughterhouse infected more than 1,500 workers. 

Portugal has also announced new restrictions in and around Lisbon.

“Reopening optimism is showing signs of fading,” noted City Index analyst Fiona Cincotta.

“Coronavirus news has been far from good on a global scale.”

“Several states in the US continue to see record daily rises, whilst the death toll in South America has topped 100,000. Yet, investors assume that there is a small chance of a second lockdown on the scale of what we have just experienced.”

Asian equities were mixed as traders weighed positive data suggesting economies are recovering against signs of a second wave of infections and the reintroduction of some lockdowns.

 

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