US stocks slide close to 6% on fears of second wave of Covid-19
Shares down at least 4% across Europe as Fed takes grim view of recovery
The Vix volatility index, nicknamed Wall Street’s ‘fear gauge’, rose 21 points to 33, its biggest one-day jump since March. Photograph: iStock
US stocks slid by close to 6 per cent on Thursday as a three-month rally was jolted by the Federal Reserve’s dire assessment of US economic prospects and fresh concerns that a second wave of coronavirus infections was coming.
Shares on Wall Street and in Europe suffered their worst one-day falls since the depths of the March market crash, a day after the Fed said the world’s largest economy faced a long path to recovery from the pandemic.
Europe’s regional benchmark, the Stoxx 600 index, tumbled 4.1 per cent. The UK’s FTSE 100 closed down 4 per cent and the German Xetra index 4.5 per cent. The Iseq closed 4.1 per cent lower.
The Fed indicated interest rates will remain close to zero until at least the end of 2022, while fresh economic data on Thursday showed US unemployment claims remained at historically high levels, reflecting the significant economic damage caused by the pandemic.
“The Fed remains deeply concerned about the trajectory of the recovery,” said Anna Stupnytska, head of global macro and investment strategy at Fidelity International. She added that “risks related to subsequent waves of infection, the upcoming elections, weak global recovery and trade tensions” would probably complicate the path to recovery.
The Vix volatility index, a measure of expected swings in the S&P 500 index over the next 30 days and nicknamed Wall Street’s “fear gauge”, rose 21 points to 33, its biggest one-day jump since March.
Government bonds rallied as investors sought safer parts of the market.
US president Donald Trump weighed in on Twitter as the equity sell-off accelerated. “The Federal Reserve is wrong so often,” he wrote. “I see the numbers also, and do MUCH better than they do. We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021. We will also soon have a Vaccine & Therapeutics/Cure. That’s my opinion. WATCH!”
Some investors said the sell-off in stocks had more to do with nerves over stretched valuations after a breathtaking rally saw US markets all but erase their coronavirus-related losses, underpinned by hopes of a quick economic recovery from the pandemic and extensive stimulus packages from governments and central banks.
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