The tech-focused Nasdaq Composite shed 2%, wiping out the last traces of the August rally. © Getty Images

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Global stock markets tumbled on Monday as concerns intensified about a second wave of coronavirus infections and investors digested the prospect of further lockdown measures crimping an economic recovery.

Germany’s Dax index dropped by 4 per cent, its worst day since June.

The tech-focused Nasdaq Composite shed 2 per cent, wiping out the last traces of the August rally, with the benchmark S&P 500 index sinking by a similar degree.

Travel and leisure stocks were particularly hard hit in the sell-off, with operators bracing for restrictions stretching into the northern winter. Shares in Lufthansa fell by 9.5 per cent. The German carrier said it expected to operate about a quarter of its normal schedule in the last three months of the year, rather than half. United Airlines was down 7.5 per cent while British Airways owner IAG fell 12 per cent.

Bank shares also suffered, a sign that investors fear a weaker economic rebound and more loans turning sour. In the UK, Lloyds Banking Group, and Barclays slid while Deutsche Bank shares were down as much as 8 per cent, their biggest one-day fall since April.

Meanwhile, HSBC’s London-listed shares fell 5 per cent to their lowest point for more than 20 years and the bank’s Hong Kong-listed stock sank to its lowest point for more than 25 years.

The sell-off was “mainly down to what’s happening in terms of Covid-19 and potential second lockdowns”, said Artur Baluszynski, head of research at investment manager Henderson Rowe.

Oil prices also fell 4 per cent to under $42 a barrel for benchmark Brent, as traders grew anxious over the outlook for energy demand. The dollar, meanwhile, rose 0.7 per cent to its highest point since July, while the yield on benchmark 10-year US government bonds fell to their early-September level as investors sought safe-haven assets. Bond yields fall as prices rise.

UK prime minister Boris Johnson will meet ministers and officials on Tuesday to discuss tougher social distancing requirements to stop an exponential spread of the virus. The government’s top medical and scientific advisers warned infections, if unabated, could reach 50,000 a day by mid-October with 200 deaths each day by mid-November. London’s mayor Sadiq Khan is pressing for new restrictions on social activity in the capital.

Spain’s government said it was ready to step up curbs to control the pandemic in Madrid even as new restrictions on movements for reasons other than work or education came into force for 850,000 people in several southern districts of the capital. Epidemiologists said curbs were needed across the Madrid region. Spain’s economic powerhouse has the highest rate of contagion in Europe, with 690 registered cases per 100,000 people, compared with 71 in the UK and 26 in Germany.

France’s third city Lyon brought in tighter limits on mass gatherings and made mask-wearing mandatory in public areas, but the French authorities have so far eschewed other controls even though new daily recorded cases exceeded 10,000 on Sunday.

Jens Spahn, German health minister, described the upsurge in infections since August in neighbouring countries as “worrying”, telling DLF radio: “Sooner or later there will be spillover into Germany.”

Iran’s supreme leader Ayatollah Ali Khamenei said an average of 150 Iranians were dying every day from Covid-19 and warned pilgrims against visiting Shia shrines in neighbouring Iraq because of the risk of infection. Iran is the worst hit country in the Middle East and health officials say Tehran is now suffering a third wave while the situation in other cities has become critical.

Despite fears of renewed lockdowns and the uncertainty posed by the US election, the wider sell-off should “prove fairly limited given the sheer abundance of central bank and government support at hand, which should ultimately place a sturdy floor under the markets”, said Candice Bangsund, vice-president and portfolio manager at Fiera Capital.

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