A jump in coronavirus cases in South Korea and Germany rattled investors and sent global equities lower on Monday, while safe- haven assets including the dollar and US treasuries edged higher.
The accelerating infection rates come as countries ranging from Japan to France are set to emerge from lockdowns that have frozen the global economy in place.
A second wave of infections would likely snuff out the rally in equity markets as investors position for a severe and prolonged global recession.
“If we do have a second wave and lockdowns, that’s almost the worst outcome from an economic perspective,” said Guy Miller, chief market strategist at Zurich Insurance Company.
Mr Miller said that would “postpone business investment indefinitely” and see consumers retrench as hopes for a quick economic recovery were dashed.
He said the next two or three weeks would be “pivotal” in demonstrating how businesses and consumers were responding to the loosening of lockdown measures.
MSCI's gauge of stocks across the globe shed 0.65 per cent following broad declines in Europe and slight gains in Asia.
In early trading on Wall Street, the Dow Jones Industrial Average fell 0.87 per cent, the S&P 500 lost 0.79 per cent, and the Nasdaq Composite dropped 0.66 per cent.
Bond markets signaled that a global economic recovery will be slow. Two-year US government bond yields have hit record lows at 0.105 per cent and Fed fund futures last week turned negative for the first time ever.
“Markets focus on reopening economies and policy activism, bears struggle to understand how they can ignore reinfection and economic destruction,” said Kit Juckes, a markets strategist at Societe Generale.
In commodity markets, oil prices were mixed as the pandemic eroded global demand. – Reuters
