Global stocks slide after jump in Florida Covid deaths

Global stocks slid on Thursday after an uptick of coronavirus deaths in Florida rekindled fears that the outbreak could hinder the fragile US economic recovery.

The S&P 500 dropped 1 per cent and the tech-heavy Nasdaq turned an earlier 0.8 per cent gain into a 0.2 per cent drop, with investors instead seeking out sovereign debt including US Treasuries and German Bunds.

States including Florida, Texas and Arizona have suffered a rise in coronavirus cases for some time, but without a related acceleration in deaths. But news on Thursday that Florida had recorded its biggest single-day jump in Covid-related deaths since the start of the pandemic serves as a warning that the impact of the outbreak could still deepen.

That put the S&P 500 on track for its worst day in just under two weeks. Investors shifted into haven assets as a result, with yields on the 10-year Treasury declining 0.05 percentage points to 0.62 per cent.

The dollar also gained, rising 0.3 per cent against the euro, and commodity prices declined. Brent, the international crude oil benchmark, fell 1.8 per cent to $42.51 per barrel and West Texas Intermediate, the US marker, slipped 2.7 per cent to $39.78 per barrel.

The data also dented shares in Europe. The composite Stoxx 600 declined 0.8 per cent, Paris’s CAC 40 slid 1.1 per cent and London’s FTSE 100 dropped 1.7 per cent.

The declines contrasted with the continued rally in mainland China shares, kick-started earlier this week by enthusiastic backing for the stock market by state-backed Chinese media. The CSI 300 index rose 1.4 per cent on Thursday, taking this week’s gains for Shanghai and Shenzhen-listed stocks to more than 9 per cent. The latest upswing came after official data from China showed that factory gate deflation eased during June.

“With fiscal stimulus and infrastructure spending still ramping up, we think that economic activity and producer prices are set to recover further in the coming months,” said Martin Rasmussen, China economist at Capital Economics.

But other analysts cautioned that a surging stock market may prompt policymakers to think twice before unleashing further stimulus measures such as cuts in the amount of reserves banks were required to hold.

“Although Beijing needs booming stock markets to boost confidence and channel capital to the business sector, it may also be concerned that an unbridled stock market boom followed by a bust could sabotage its efforts to return the economy to normal,” said Ting Lu, chief China economist at Nomura.

China’s onshore-traded renminbi strengthened 0.3 per cent and passed the important seven-to-the-dollar marker for the first time since March, reaching 6.9852.

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