Coronavirus: Second wave fears spark drive volatility for stocks

·Senior City Correspondent, Yahoo Finance UK
·3-min read
A woman wearing a protective face mask to help curb the spread of the new coronavirus walks by the seafood wholesale market closed for inspection in Beijing, Sunday, June 14, 2020. China is reporting its highest daily total of coronavirus cases in two months after the capital's biggest wholesale food market was shut down following a resurgence in local infections. (AP Photo/Andy Wong)
A new outbreak was detected in Beijing over the weekend, as stocks around the world sold off sharply on Monday. (Andy Wong/AP Photo)

Trade in stocks continued to be volatile around the world on Monday, amid fears about a resurgence in COVID-19 infections.

Stock markets on both sides of the Atlantic opened with drops of 2% or more on Monday. Analysts said the sharp sell-off was driven by fears about rising COVID-19 cases worldwide.

“Equity markets start the week under pressure on weaker than expected Chinese retail sales and industrial production, [and] continued evidence of a second wave of COVID-19 in some parts of emerging markets and the sunbelt in the United States, either through mismanagement, as in Brazil, or as the economy re-opens,” said Sebastien Galy, a senior macro strategist at Norwegian bank Nordea.

California, Texas, Florida and Arizona continue to battle serious outbreaks in the US. A new outbreak was also detected in Beijing over the weekend, said to have originated in a food market. China has introduced localised restrictions in response.

Still, the stocks sell-off in Europe and the US moderated as the session wore on. European stock markets ended the day in the best position they had been all session. The FTSE 100 (^FTSE) closed down just 0.6%, while the DAX (^GDAXI) was 0.3% lower and the CAC 40 (^FCHI) fell 0.4%.

Losses had also moderated on Wall Street by the time trade ended in Europe. At 5.30pm, the S&P 500 (^GSPC) was down just 0.2%, the Dow (^DJI) was off just 0.4% and the Nasdaq (^IXIC) had turned positive for the day, with a gain of 0.2%.

“There were Sunday headlines of China seeing the largest increase in new cases since April and a very localised lockdown around a market in Beijing,” strategist Jim Reid and his team at Deutsche Bank wrote in a note to clients on Monday morning. “However, at 57 new cases reported in a country of 1.4 billion people, we have to put this into some perspective.

“This rounded up the 1-day new case growth to 0.1% after 62 days of 0.0% growth. A further 49 cases have been reported overnight with Beijing shutting down housing districts in and around the market in focus.”

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Asian markets closed lower on Monday. Japan’s Nikkei (^N225) lost 3.4% and the Hong Kong Hang Seng (^HSI) fell 2.1%. On mainland China, the Shanghai Composite (000001.SS) dropped 1% and the Shenzen Component (399001.SZ) fell 0.5%.

Monday’s choppy session follows a similarly volatile day on Friday and a steep sell-off on Thursday last week.

Globally there are now 7.9 million cases of COVID-19 and the 7-day moving average in daily new cases has hit an all-time high, according to the World Health Organisation (WHO)’s latest situation report.