Intl desk, June 12: Financial markets have tumbled amid fears that an uptick in coronavirus cases will hurt the economic recovery.The global declines came a day after America’s central bank warned the US faced a long road to economic recovery, BBC reported.
In the US, the three main financial indexes saw their worst day in weeks, with the Dow Jones Industrial Average down almost 7%.
The falls followed a weeks-long rally that had helped shares recover some ground from March lows.
Energy and travel stocks were among the biggest losers, as oil prices also took a hit.
Earlier, European and Asian shares also dropped, with the UK’s FTSE 100 sinking about 4%. In Germany, the Dax fell 4.4%, while in France the CAC 40 ended 4.4% lower.
“Government, companies and people would be better prepared for a second wave than for the first one,” said Roland Kaloyan, European equity strategist at Societe Generale.
“But the problem is there is a limit to governments injecting money.”
Share prices had gained amid hopes that the economy would rebound as authorities loosened the controls put in place to try to slow the spread of the virus.
Last week’s surprise report showing US employers had restarted hiring in May helped to push the Nasdaq index to new highs.
But the recovery remains tentative. On Thursday, the US Labor Department reported that another 1.5 million people had filed new unemployment claims last week. More than 30 million continue to collect the benefits, it said.
Bank policymakers said on Wednesday that the unemployment rate could remain above 9% at the end of the year – close to the worst level of the financial crisis.
At his press conference on Wednesday, bank chair Jerome Powell warned that assessment may prove optimistic, should infection and hospitalisation rates worsen.
Several states that have moved to reopen, including Arizona and South Carolina, have seen an uptick in cases in recent days.
“It could hurt the recovery, even if you don’t have a national level pandemic. Just a series of local ones, of local spikes, could have the effect of undermining people’s confidence in travelling, in restaurants and in entertainment,” he said. “It would not be a positive development.”
The Dow dropped 1,861.8 points or 6.9% to end at 25,128, while the S&P 500 slid 188 points or 5.9% to 3,002.1. The Nasdaq closed 527.6 points lower or 5.2% at 9,492.7.
Treasury Secretary Steven Mnuchin said he did not want to see a return of the lockdowns that kept the world’s largest economy frozen for weeks this spring.
But economists have warned that people will stay home voluntarily if they are afraid of becoming ill.