Global stocks slipped on Thursday after an uptick of coronavirus deaths in Florida rekindled fears that the outbreak could hinder the fragile US economic recovery.
The S&P 500 closed 0.6 per cent lower, led by stocks sensitive to consumer spending and virus-related restrictions such as United Airlines, which fell 7.3 per cent. The tech-heavy Nasdaq rose 0.5 per cent to a fresh record, as reliance on online activities remained high. Investors instead sought out the safety of sovereign debt including US Treasuries and German Bunds.
States including Florida, Texas and Arizona have suffered a rise in coronavirus cases for some time, without a related acceleration in deaths. However, data on Thursday that showed Florida had recorded its biggest single-day jump in Covid-related deaths since the start of the pandemic served as a warning that the impact of the outbreak could still deepen.
Investors shifted into haven assets as a result. The yield on the 10-year German Bund touched minus 0.5 per cent.
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US Treasuries also rallied, sending yields sharply lower. The yield on 30-year bonds dropped 0.09 percentage points to 1.3 per cent, following strong demand from investors in a $19bn auction of new debt. The benchmark 10-year note saw its yield slide as well, falling 0.06 percentage points to 0.6 per cent. Yields fall when prices rise.
The dollar also gained, rising 0.4 per cent against the euro, and commodity prices declined. Brent, the international crude oil benchmark, fell 2.4 per cent to $42.27 per barrel and West Texas Intermediate, the US marker, slipped 3.5 per cent to $39.48 per barrel.
The surge of coronavirus cases knocked shares in the last 90 minutes of trading in Europe. The composite Stoxx 600 declined 0.8 per cent, with energy company BP and Commerzbank both down 4.4 per cent. London’s FTSE 100 index was the worst performer, down 1.7 per cent.
The declines contrasted with a continued rally in mainland China shares, kick-started earlier this week by enthusiastic backing for the stock market by state-backed Chinese media. The CSI 300 index rose 1.4 per cent on Thursday, taking this week’s gains for Shanghai and Shenzhen-listed stocks to more than 9 per cent. The latest upswing came after official data from China showed that factory gate deflation eased during June.
“With fiscal stimulus and infrastructure spending still ramping up, we think that economic activity and producer prices are set to recover further in the coming months,” said Martin Rasmussen, China economist at Capital Economics.
But other analysts cautioned that a surging stock market may prompt policymakers to think twice before unleashing further stimulus measures such as cuts in the amount of reserves banks were required to hold.
“Although Beijing needs booming stock markets to boost confidence and channel capital to the business sector, it may also be concerned that an unbridled stock market boom followed by a bust could sabotage its efforts to return the economy to normal,” said Ting Lu, chief China economist at Nomura.
China’s onshore-traded renminbi strengthened 0.3 per cent and passed the important seven-to-the-dollar marker for the first time since March, reaching 6.9852.
Additional reporting by Philip Stafford, Colby Smith and Matthew Rocco
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