NEW YORK/LONDON (Reuters) – Global stock markets fell on Thursday as a continued rise in the number of coronavirus cases dashed hopes of a swift recovery from the pandemic-induced economic slump and drove demand for safe-haven currencies such as the dollar and Japanese yen.
Around 400 workers tested positive for the virus at an slaughterhouse in northern Germany, fueling contagion concerns, yet gold prices eased a bit after a Chinese medical expert said Beijing has brought a recent outbreak under control.
Stocks on Wall Street seesawed either side of breakeven as investors struggled to interpret the impact of economic data without any guidance from corporations on their earnings.
Cleveland Federal Reserve Bank President Loretta Mester said it could take a year or two for the U.S. economy to return to pre-pandemic levels, with the gross domestic product declining by 6% in 2020 and the unemployment rate still around 9% by year’s end.
Justin Onuekwusi, portfolio manager at Legal & General Investment Management, said the flare-ups in Germany and China and rising infection rates in some U.S. states were cause for concern.
“It’s going to be a theme where we see economies having to do mini-lockdowns and isolation measures in order to contain the virus. The question is how much it affects markets,” he said.
U.S. data suggested a declining pace of Americans filing for unemployment benefits has stalled, reminding investors the economy faces a long and difficult recovery from the COVID-19 recession. At least 29 million Americans are collecting unemployment checks, a sign of the tough road ahead.
“The restarting of the economy is going to be slow, it’s going to be uneven and initial jobless claims today reflect that,” said Kristina Hooper, chief global market strategist at Invesco.
Rising coronavirus infection rates raises the question of what happens if that continues, Hooper said, noting that many states will not reimpose lockdowns because they want to allow economic activity to continue.
“You could have a situation where infections continue to rise, but it doesn’t necessarily have the impact on economic activity that it did in March and April,” Hooper said.
MSCI’s gauge of stocks across the globe shed 0.41%, while the pan-European STOXX 600 index closed down 0.71%, hurt by a plunge in Wirecard shares over missing cash balances.
Emerging market stocks lost 0.12%, while Wall Street was lower after Nasdaq gave up earlier modest gains.
The Dow Jones Industrial Average fell 171.95 points, or 0.66%, to 25,947.66, the S&P 500 lost 13.33 points, or 0.43%, to 3,100.16 and the Nasdaq Composite dropped 17.14 points, or 0.17%, to 9,893.40.
China’s blue-chip CSI300 shares were a bright spot, adding 0.7%, helped by reassurances from its central bank governor that the world’s second-largest economy would maintain ample financial liquidity in the second half of 2020 as the economy recovers.
Euro zone bonds hardly budged, even as the European Central Bank announced record demand for its new round of cheap loans, with the strong take-up expected to support the bond market.
Italian yields slipped slightly, with 10-year yields falling to a new low since late March, of 1.33%. They were last down 3.5 basis points at 1.34%.
British government bond yields touched their highest level since June 10 after the Bank of England increased its bond-buying program by another 100 billion pounds ($125 billion) to help revive the economy, but sharply slowed the pace of its purchases.
In currency markets, the yen touched a six-day high of 106.70 in Asian trading and was last neutral at 107.
The Norwegian crown was the biggest mover among major currencies, after Norway’s central bank said the country’s economic prospects had improved more than expected in recent weeks and its key policy interest rate would be kept unchanged.
The crown was up 0.6% versus the dollar at 9.4560.
The dollar index rose 0.37%, with the euro down 0.34% to $1.1205. The yen strengthened 0.16% versus the greenback at 106.84 per dollar.
U.S. Treasury yields fell and crude oil rose as worries about fuel demand following the rising coronavirus cases were offset by U.S. government data showing lower inventories of gasoline and distillates, indicating higher demand.
FILE PHOTO: A street cleaning operative walks past the London Stock Exchange Group building in the City of London financial district, whilst British stocks tumble as investors fear that the coronavirus outbreak could stall the global economy, in London, Britain, March 9, 2020. REUTERS/Toby Melville
Benchmark 10-year U.S. Treasury notes fell 4.1 basis points to yield 0.692%.
U.S. crude settled up 88 cents at $38.84 a barrel, while Brent rose 80 cents to settle at $41.51.
In commodity markets, spot gold dropped 0.2% to $1,723.60 an ounce.
Reporting by Herbert Lash; Editing by Dan Grebler and Leslie Adler