Global markets dropped on Wednesday as rising US Covid-19 cases and new quarantine measures fuelled fears that the virus could derail an economic recovery.
On Wall Street, the S&P 500 finished 2.6 per cent lower and the Nasdaq Composite slid 2.2 per cent. Markets in the US and Europe also retreated, with the FTSE 100 and the Euro Stoxx 50 both ending down 3.1 per cent.
Stocks extended losses after the governors of New York, New Jersey and Connecticut announced that travellers coming in from states that have a high infection rate must quarantine for 14 days. The restrictions came after Florida reported a record daily increase in Covid-19 cases.
Renewed trade friction between the US and Europe also knocked investor sentiment. Washington launched a consultation on new tariffs on $3.1bn of European products - ranging from German camera lenses to British biscuits and French wine - in a move that would broaden a transatlantic dispute over aircraft subsidies.
Traders are scrutinising the latest coronavirus figures as the global case count tally rises above 9 million and more than 450,000 deaths have been reported.
Anthony Fauci, a leading member of the White House coronavirus task force, warned Congress that the US was experiencing a "disturbing surge" in Covid-19 cases as the country on Tuesday recorded its largest daily jump in two months.
"The next couple of weeks are going to be critical in our ability to address the surges we're seeing in Florida, Texas, Arizona and other states," Dr Fauci said. Those states were among the first to loosen lockdowns in an attempt to restart economic growth that had stalled.
"There is no need for official 'stay at home' orders for economic activity to take a hit," said Oscar Muñoz, a macro strategist at TD Securities. "People can become risk-averse and consumer confidence can be dented as infections rise."
Other countries have faced rapid rises in their infections as well, with India's densely populated capital New Delhi on Tuesday reporting 4,000 new cases in a record rise. Brazil is also a virus hotspot as authorities have struggled to contain the pandemic.
However, the three months to June is set to be the best quarter for the S&P 500 in 45 years, according to Bloomberg data, marking a rebound from the 20 per cent dive in the first quarter when Covid-19 began to spread worldwide.
"It will take more than a slow grind higher in daily new Covid-19 cases to deliver a meaningful market adjustment," said Robert Carnell, head of Asia-Pacific research at ING. "There are plenty of options open to countries like the US short of reimposing lockdowns," he said, such as enforced mask wearing.
Oil prices dropped after US data showed a much bigger than expected increase in crude oil inventories last week. Brent crude, the international benchmark, sunk 5.8 per cent to $40.13 (€35.66) a barrel while West Texas Intermediate, the US marker, dropped 6.1 per cent to $37.91.
A stronger dollar meant gold trimmed earlier gains to hold steady at $1,765. That is still close to an eight-year high as investors flee to perceived safety during times of turmoil. The metal has advanced more than 20 per cent since March.
Nikolaos Panigirtzoglou, analyst at JPMorgan, said the markets were balancing signals of economic recovery against fears of a widespread second wave of coronavirus cases. "Outbreaks in the US in the south and west have shown signs of growing momentum, as well as in some parts of [LATIN AMERICA]," he said. However, global data suggested a second wave "might not be as extreme as [THE]first".
The picture in Asia was mixed on Wednesday. Hong Kong's Hang Seng index closed down 0.5 per cent, while China's CSI 300 benchmark rose 0.4 per cent and Australia's S&P/ASX 200 added 0.2 per cent.
South Korea's Kospi climbed 1.4 per cent after North Korea said it had suspended plans for military action against the country, marking a de-escalation in recent provocations. – Copyright The Financial Times Limited 2020