Global stock markets collapse and bonds rise for fear of a second wave of infections

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NEW YORK (Reuters) – A surge in coronavirus cases in South Korea and Germany shook investors and lowered global stock markets on Monday as safe haven assets, including the dollar and US Treasuries, have increased slightly.

FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of Lower Manhattan during the epidemic of coronavirus disease (COVID-19) in New York, United States, on April 26, 2020. REUTERS / Jeenah Moon

The acceleration of infection rates comes as countries from Japan to France are on the verge of breaking out of the bottlenecks that have frozen the global economy.

A second wave of infections is likely to stifle the recovery of the equity markets as investors position themselves for a severe and prolonged global recession.

“If we have a second wave and lockouts, it’s almost the worst result from an economic point of view,” said Guy Miller, chief market strategist at Zurich Insurance Company.

Miller said it would “delay corporate investment indefinitely” and that consumers would retreat as hopes of a rapid economic recovery were dashed.

He said the next two to three weeks would be “crucial” to demonstrating how businesses and consumers are responding to the relaxation of the lockdowns.

MSCI’s global share tonnage lost 0.20% after large declines in Europe and slight increases in Asia.

In midday trading on Wall Street, the Dow Jones Industrial Average .DJI fell 146.68 points, or 0.6%, to 24,184.64, the S&P 500 .SPX lost 6.41 points, or 0, 22%, at 2,923.39 and the Nasdaq Composite .IXIC added 39.32 points, or 0.43%, to 9,160.64.

Rising trade tensions between the U.S. and China are also likely to weigh on investor sentiment, given the disproportionate rally that has pushed the S&P 500 benchmark index up nearly 30% since its March lows, a said Frédérique Carrier, head of investment strategy at RBC Wealth Management.

“We think the Trump administration is unlikely to start a new trade war that would hinder an economic recovery, but the possibility of missteps remains,” she said.

Bond markets have signaled that a global economic recovery will be slow. Two-year US government bond yields hit record lows at 0.105% and Fed fund futures last week turned negative for the first time.

The 10-year benchmarks fell for the last time by 1/32 to yield 0.6844%, against 0.681% on Friday evening.

“The markets are focused on reopening economies and political activism, [while] bears have trouble understanding how they can ignore reinfection and economic destruction, “said Kit Juckes, market strategist at Societe Generale.

In commodity markets, oil prices fell as the pandemic eroded global demand.

American crude oil recently fell 1.09% to $ 24.47 a barrel and Brent crude to $ 29.98, down 3.2% on the day.

David Randall’s report; Editing by Andrea Ricci and Dan Grebler

Our standards:Principles of the Thomson Reuters Trust.

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