European stock markets fell on Thursday and investors moved into highly rated government bonds on further signs the second wave of coronavirus in the region is gathering pace.
The gloomy start to trade comes as several countries including Germany, France and the UK have announced new restrictions in recent days in an attempt to slow the spread of the virus. Germany, which has been seen as one of the countries with the most robust response to the pandemic, has now recorded its highest daily rise in cases to date.
In early dealings, Europe’s benchmark Stoxx 600 index fell 1.7 per cent. Germany’s Dax declined 2.1 per cent, while the CAC 40 in France dropped 1.4 per cent. London’s FTSE 100 slipped 2 per cent.
Investors found shelter in government bonds that are considered to be havens during times of rising angst, pushing yields lower. The US 10-year Treasury yield fell 0.02 percentage points to 0.7 per cent, while the equivalent German Bund was off by a similar margin to minus 0.6 per cent.
Italian bank UniCredit noted on Thursday that other concerns had also begun to cloud market sentiment: “Rising Covid-19 cases, a mixed bag of quarterly earnings reports from major US banks, Brexit clouds and fading hopes for a new US stimulus package are setting the tone in,” it said.
In the US, hopes of fresh US stimulus were further damped on Wednesday. Treasury secretary Steven Mnuchin said that he does not expect to reach a deal on the coronavirus relief package prior to the election, as he remained “far apart” from House of Representatives speaker Nancy Pelosi on some of its details.
US stock futures pointed to further declines after the benchmark S&P 500 index fell on Wednesday for the second day in a row.
In currencies, the US dollar, which like sovereign bonds is considered to be a safe bet, climbed 0.1 per cent against a basket of six peers.
Additional reporting by Harry Dempsey in London.