Markets fall sharply amid surge in COVID-19 cases

Markets in the US and Europe fell sharply on Wednesday.

The S&P 500 tumbled 2.6 percent and the STOXX Europe 600 plunged 2.8 percent. Asian markets were mixed, with the Shanghai Composite rising 0.3 percent but the Nikkei 225 falling 0.1 percent.

Oil prices plunged more than 5 percent.

A surge in COVID-19 cases intensified fears of another round of government lockdowns and worsening economic damage.

In the US, the three most populous states, California, Texas and Florida, all set records for the number of new cases in one day. The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must self-quarantine for 14 days on arrival.

“Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy,” said Art Hogan, chief market strategist at National Securities.

News that the US may modify duties on a range of EU products and was weighing tariffs on other products from Britain, France, Spain and Germany also hurt market sentiment.

Meanwhile, the International Monetary Fund said it now expects global output to shrink by 4.9 percent, compared with a 3.0 percent contraction predicted in April.

“People who are looking for a magical V [recovery] are delusional,” said Julian Emanuel, head of equities and derivatives strategy at BTIG.

“Investors are positioned very optimistically,” said Liz Ann Sonders, Charles Schwab chief investment strategist. “When you get to extremes of sentiment in either direction it often takes less of a catalyst to ignite the naturally contrarian move in the market.”