Stocks Drop As Gloomy Fed Compounds Second-wave Virus Fears
Umer Jamshaid Published June 12, 2020 | 01:09 PM
World stock markets sustained heavy losses Thursday after the US Federal Reserve warned of a "highly uncertain" economic outlook because of the coronavirus pandemic, and investors worried about a possible second wave of the killer disease in the United States
London, (UrduPoint / Pakistan Point News - 11th Jun, 2020 ):World stock markets sustained heavy losses Thursday after the US Federal Reserve warned of a "highly uncertain" economic outlook because of the coronavirus pandemic, and investors worried about a possible second wave of the killer disease in the United States.
On Wall Street the Dow was down by 900 points moments after the opening bell, while key eurozone markets were more than three percent lower, with London faring only marginally better.
That followed sharp sell-offs across Asia after the US central bank's Federal Open Market Committee (FOMC) warned that the world's top economy would take time to fully recover from the worst global emergency in generations.
In a statement it said the crisis "poses considerable risk to the economic outlook over the medium term", forecasting a 6.5 percent contraction this year and unemployment of 9.3 percent.
- 'Hangover' - "A combination of a post-FOMC hangover and reports of a substantial increase in virus case counts in Texas have left traders in a state of risk limbo," said Stephen Innes, a global strategist with AxiCorp.
California, Florida and Texas have reported new spikes in COVID-19 infections.
"Jumps in new daily cases... immediately sparked concerns of a potential second round of infection in the country, inevitably impacting market sentiment towards riskier assets," said ActivTrades analyst Pierre Veyret.
Stocks worldwide had been rallying for several weeks as lockdown measures are eased in key regions, and after governments and central banks pledged trillions of dollars in support to kickstart growth, sparking investor optimism.
"The market got too far ahead of itself," said Markets.com analyst Neil Wilson.
Meanwhile, another 1.54 million US workers filed for unemployment benefits last week, the Labor Department said Thursday, bringing the total since mid-March to 44.2 million.
The week's reading was roughly in line with forecasts.
Back in Europe, shares in German airline Lufthansa dived in Frankfurt after the company said it would axe 22,000 jobs.
Centrica dipped one percent after the UK energy supplier shed 5,000 positions.
Oil prices tumbled after data showed US supplies jumped 5.7 million barrels last week, reviving demand worries despite easing lockdowns.
- Key figures around 1330 GMT - London - FTSE 100: DOWN 2.8 percent at 6,153.89 points Frankfurt - DAX 30: DOWN 3.1 percent at 12,148.15 Paris - CAC 40: DOWN 3.2 percent at 4,891.81 EURO STOXX 50: DOWN 3.1 percent at 3,190.85 New York - Dow: DOWN 3.4 percent at 26,085.13 Tokyo - Nikkei 225: DOWN 2.8 percent at 22,472.91 (close) Hong Kong - Hang Seng: DOWN 2.3 percent at 24,480.15 (close) Shanghai - Composite: DOWN 0.8 percent at 2,920.90 (close) West Texas Intermediate: DOWN 6.8 percent at $36.889 per barrel Brent North Sea crude: DOWN 5.9 percent at $39.25 Euro/dollar: DOWN at $1.1356 from $1.1374 at 2100 GMT Dollar/yen: DOWN at 106.86 yen from 107.12 yenPound/dollar: DOWN at $1.2648 from $1.2747Euro/pound: UP at 89.78 pence from 89.23 pence
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