Global stocks drop on rising fears of second coronavirus wave

Global stocks fell further on Friday as fears over a second wave of coronavirus infections in the US hit investors’ hopes for a strong economic rebound from the pandemic.

Tokyo’s benchmark Topix index dropped 1.2 per cent, Australia’s S&P/ASX 200 fell 2 per cent and South Korea’s Kospi shed 2.3 per cent. Hong Kong’s Hang Seng was 1.3 per cent lower and China’s CSI 300 index of Shanghai and Shenzhen-listed stocks slipped 0.5 per cent.

The sell-off across Asian markets came after US and European stocks suffered their worst one-day falls since March. Investors were rattled by the Federal Reserve’s dire assessment of US economic prospects this week and rising Covid-19 cases in states in the west and south after the easing of lockdowns.

Wall Street’s S&P 500 plunged 5.9 per cent in New York, its worst day since March 16, while the tech-heavy Nasdaq Composite fell 5.3 per cent, retreating from a record high.

“The Federal Reserve’s assessment on the economy always carries weight but the latest forecasts were broadly in line with what economists have been expecting for some weeks,” said Tai Hui, chief Asia markets strategist for JPMorgan Asset Management. “The fear of a rising rate of Covid-19 infections is the most important driver in our view for this sell-off.”

Robert Carnell, Asia-Pacific head of research at ING, said that a surge in coronavirus cases in the US had provided a reality check for markets, which have rallied in recent weeks on the expectation of a V-shaped recovery in economic activity.

“But really, stocks probably fell so much simply because they had gone up too much,” he added. “Some investor fingers will have been burnt. But others will see this as a buying opportunity. After today’s adjustment, there is no telling which way markets will go. ”

Futures trading in Asia tipped the S&P 500 to rise by 1.2 per cent when Wall Street reopens on Friday. But the FTSE 100 was expected to drop another 0.6 per cent after closing 4 per cent lower on Thursday.

Concerns over the global economy spurred demand for the dollar, reversing a recent sell-off for the greenback. The pound fell 0.2 per cent to $1.2573 taking its losses over the past two days to 1.6 per cent.

Oil prices were also under pressure. Brent, the international marker, fell another 1.1 per cent to $38.12 a barrel, adding to Thursday’s 7.6 per cent tumble after US data showed crude inventories rose to a record high. US benchmark West Texas Intermediate fell 1.4 per cent to $35.83.