Global equities tumble on covid-19 fears and US jitters

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Global equities tumble on covid-19 fears and US jitters

Stockmarkets fell yesterday (26 October) following concerns about new lockdown measures across Europe and yet another failure to agree on a new US stimulus package. 

The S&P 500 fell by almost 3% yesterday afternoon before closing down 1.9%, marking its worst day in a month following fears over a record surge in new US coronavirus cases just a week before the US Presidential Election.

However, Nancy Pelosi, Democratic speaker of the House of Representatives, expressed optimism about renewing the fiscal deal for jobless benefits which expired at the end of July.

Coronavirus concerns as a second wave builds in Europe and the US are giving investors indigestion at the beginning of the week."

The sharp drop in Wall Street dragged down equities in much of the Asia-Pacific region. Japan's TOPIX index fell 0.2% on Tuesday, Hong Kong's Hang Seng was down 0.9% and Australia's S&P/ASX 200 dropped 1.7%.

The US, Russia and France have all had record rises in daily covid-19 cases in recent days, while the UK is due to extend its highest category alert to more cities.

This has raised the prospect that some governments might consider enforcing full lockdown. Italy and Spain, which were hit the hardest by the first Covid-19 wave, have already entered new lockdowns to tackle a surge in new cases.

Germany's Dax index tumbled 3.7% then another 0.1% in morning trading on Tuesday as worries grew over the impact of new lockdown measures across Europe.

The country's wider Stoxx 600, which lost 1.8% on Monday, shed another 0.2%. It comes as German Chancellor Angela Merkel has warned colleagues the country is on the verge of losing control of the virus.

The FTSE 100 opened the day slightly higher from yesterday's close with Covid infection fears still weighing heavily on sentiment.

HSBC shares rose as the bank said it would consider paying a dividend at the end of Q4 after it third-quarter profit expectations were higher than expected.

CMC Markets chief market strategist Michael Hewson said in a written note: "After the worst session for US stocks in over a month and a similarly negative open for markets in Europe yesterday, today's European session has got off to a slightly rocky start after starting in positive territory.

"Despite the better start it's difficult to escape the feeling that investors are undergoing much higher levels of apprehension about how events over the next few days and weeks are likely to play out, with respect to the prospect of tighter restrictions and new lockdowns."

Jim Tierney, AllianceBernstein chief investment officer of concentrated US growth, told the Financial Times that with the rise in US Covid-19 cases and hospitalisations, as well as the election just over a week away, "some pullback seems warranted".

He added that the severity in the stock market sell-off "is not always rational on a daily basis".

AJ Bell investment director Russ Mould said: "Coronavirus concerns as a second wave builds in Europe and the US are giving investors indigestion at the beginning of the week.

"Brexit-inspired sterling weakness helped spare the FTSE 100 from the larger losses seen in other European markets with the DAX down more than 4% so far this week.

"The rapid increase in coronavirus infections around the globe and in America itself and what seemed like the final extinguishing of any hopes a stimulus package could be agreed ahead of next week's Presidential election put stocks firmly on the back foot.

"Investors are likely to be kept busy this week with several of the biggest companies in the US set to serve up their third quarter earnings - these could help determine if the market's mood sweetens or sours in the coming days."

This article was first published by our sister title Investment Week