The technology-focused Nasdaq Composite fell 2%, erasing the last traces of the merger in August, as the benchmark S&P 500 fell to a similar degree. The declines in Europe were even more pronounced, with the German Dax falling 4% on its worst day since June.
The new virus concerns have taken a heavy toll on banking and travel shares in the markets, knocking Bank of America down 4% and United Airlines by 10%. The falls come against a backdrop of persistent increases in coronavirus cases around the world and the prospect of tighter lockdown restrictions in countries such as the UK. Oil prices also fell 4 percent to less than $ 42 a barrel for benchmark Brent as traders grew anxious about the outlook for energy demand.
The dollar, meanwhile, rose 0.7% to its highest level since July, as the benchmark 10-year U.S. Treasury yield fell to its early September level as investors sought active shelters. Bond yields fall as prices rise.
Nasdaq-listed shares of electric truck maker Nikola fell 14% after its founder announced he would step down as executive chairman following allegations by a short seller that the company was a ‘complex fraud’ – claims rejected by society.
London’s FTSE 100 fell 3.5%, in part due to the travel industry. Shares of British Airways owner IAG fell 12%, while Trainline was down 13% and InterContinental Hotels slipped almost 4%.
Bank stocks also suffered. In the UK, lenders including Lloyds Banking Group and Barclays have slipped. Deutsche Bank shares fell 8%, their biggest single-day drop since April. Meanwhile, HSBC’s London-listed shares fell 5% to their lowest point in over 20 years and the bank’s Hong Kong-listed shares fell to their lowest point in over 25 years. .
The sale is “mainly due to what’s going on in terms of Covid-19 and potential second lockdowns,” said Artur Baluszynski, head of research at investment manager Henderson Rowe.
Patrick Vallance, Britain’s chief scientific adviser, warned on Monday that there could be 50,000 new infections every day by mid-October if the virus continued to spread at its current rate. New infections in the UK were doubling every seven days, he said.
Deutsche Bank analysts said: “We expect the pace of recovery to slow down over the next few quarters in most if not all economies as the virus spreads faster with the onset of time. cold in the northern hemisphere, and thanks to a likely halt in US budget support until after the November elections. ”
The sharp decline in bank stocks partly reflects long-standing pressure on bond yields and the prospect of a long run of near zero interest rates. But pressure on lenders intensified after the International Consortium of Investigative Journalists and other media groups, including BuzzFeed, alleged that global banks reported suspicious transfers worth more than $ 2. billion dollars to US anti-money laundering authorities between 1999 and 2017.
Dickie Wong, head of research at Kingston Securities, said the ICIJ report added to a host of issues that were undermining investor demand for HSBC shares, including the bank’s April announcement that ‘it would end dividend payments.
HSBC’s Hong Kong-listed shares fell below HK $ 30 on Monday, a level they failed to even cross during the global financial crisis: “Even individual investors have already given up on the stock,” said Mr. Wong.
However, despite fears of further lockdowns and the uncertainty posed by the U.S. election, the broader sell-off is expected to “prove to be quite limited given the abundance of central bank and government support on hand, which should eventually place a solid floor under the markets ”. said Candice Bangsund, vice president and portfolio manager at Fiera Capital.
Nick Nelson, head of European equities strategy at UBS, said markets had until Monday “watched” the increase in the number of infections. But the selloff is unlikely to be as dramatic as that of March, he added: “It looks more like a correction from a rally that had gone a little too far.”