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Wall Street leads global stocks slump as Covid-19 infections rise

City AM logo City AM 26/10/2020 Harry Robertson
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Wall Street suffered its worst daily decline in weeks today as global stock markets posted losses amid a rise in new Covid-19 infections.

There was a sea of red across the major US indices as markets closed this evening, with the S&P 500 posting its sharpest daily fall in four weeks.

The downbeat sentiment across the pond followed on from a lacklustre day of trading in Europe, where a string of fresh lockdown restrictions have come into force.

The FTSE 100 closed 1.16 per cent lower this afternoon, while the more domestically-focused FTSE 250 was down 1.42 per cent.

Read more: Coronavirus: UK economic recovery stumbles as business growth slips

Coronavirus cases have risen sharply in Europe and the US in recent weeks. Over the weekend, Italy brought in its strongest restrictions since the first wave of cases in May.

Spain also toughened up its rules, and countries have put in place new restrictions over the past few weeks.

Germany’s Dax plunged 3.7 per cent today, dragged down by software giant SAP which cut its sales outlook. The Europe-wide Stoxx 600 fell 1.8 per cent.

On Wall Street, indices were down between 1.8 and 2.3 per cent. Investors sought the safety of the dollar and government bonds.

“Ugly headlines are everywhere,” said Edward Moya, senior market analyst at currency firm Oanda. “Wall Street is in for a rough session as virus anxiety runs wild. Europe’s second wave is accelerating.”

Dividend hopes help FTSE 100 lenders

The FTSE 100 was a relative outperformer, however, after The Times reported that the Bank of England and UK lenders are negotiating a deal to allow dividends to be paid again.

Barclays, Natwest and Lloyds all rose earlier in the session. But they slipped back in the afternoon.

Worries over the global economy saw stocks like Burberry, Intercontinental Hotels, and Rolls Royce drop.

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Read more: Oil prices fall on fears of production boost amid surge in Covid-19 cases

Oil prices fell on expectations of lower demand as new coronavirus restrictions are put in place.

The global benchmark Brent crude price was down 3.4 per cent to $40.30. That weighed on FTSE 100 oil firms BP and Shell.

US stocks tumble as stimulus hopes fade

On Wall Street, the benchmark S&P 500 dropped 1.86 per cent — its worst decline in the last four weeks.

The Dow Jones dropped 2.3 per cent and the Nasdaq fell 1.6 per cent.

Coronavirus cases have risen sharply in recent days. The US reported an average of 69,814 cases a day over the last week, according to a New York Times tracker. That was up 32 per cent from the average two weeks earlier.

US stocks were also dragged down by the continued failure by Republicans and Democrats to agree on a fresh funding deal.

Although there have been mixed signals from talks, it looks increasingly unlikely that there will be another fiscal stimulus bill before the 3 November presidential election.

Expectations of a Democrat “clean sweep” – with the party taking both the presidency and Congress – have also fallen recently. Investors think that makes a very large stimulus package less likely.

Moya said: “Stimulus talks are ongoing, but no one should be pricing in a deal before the election.”

The dollar rose 0.4 per cent against a basket of other currencies. Investors traditionally seek out the ultra-safe greenback at times of financial stress. US Treasury bonds also rose.

Read more: Number 10 extends Brexit talks until Wednesday

Travel trouble

Once again it was travel firms that bore the brunt of the stocks sell-off today.

The S&P 1500 airlines index fell roughly 5.6 per cent, while cruise operators Carnival and Royal Caribbean fell 8.7 per cent and 9.7 per cent respectively.

British Airways owner IAG dropped 7.6 per cent, while budget rivals Easyjet and Ryanair both closed in the red.

“Stock markets in Europe have been rocked by the jump in Covid-19 cases, and the stricter restrictions are a factor too,” said David Madden at CMC Markets.

“During the summer months, there was a sense of optimism in the markets as economies were being reopened and there was a view that governments had a handle on the crisis.

“Now there is a feeling that countries are struggling to contain the health emergency, and the announcement of curfews and localised lockdowns adds to the view that things are going to get worse before they get better.”

The post Wall Street leads global stocks slump as Covid-19 infections rise appeared first on CityAM.


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