Asian, European stocks sink as virus, stimulus sour mood

Concerns about the reimposition of virus lockdowns, stalled vaccine trials and dimming hopes of new US stimulus soon weighed on Asian and European markets Thursday.

Regional investors tracked another sell-off in New York, where all three main indexes turned negative after Treasury Secretary Steven Mnuchin warned that while talks continued, Republicans and Democrats were still “far apart” on a rescue package.

While the broad view is that a new spending package will get passed eventually, the comments reinforced expectations that there will be nothing before next month’s presidential and congressional elections.

“This has been an ongoing drama,” said Paul Nolte, at Kingsview Investment Management.

“The latest twist I heard is nothing is going to get done until the election. That’s why I think you’re getting the market selling off a little bit.”

However, analysts said traders were taking comfort from the possibility that Joe Biden and the Democrats will win the presidency and both houses of Congress, paving the way for a bigger stimulus than anything that could be agreed before the vote.

Adding to the downbeat mood on trading floors is the surge in coronavirus infections in Europe, which is forcing governments to revert to tough containment measures that observers fear could deliver a blow to a tentative recovery from national lockdowns earlier this year.

France on Wednesday imposed a curfew in Paris and eight other cities -- covering almost a third of the country’s population -- for as long as six weeks, while Germany and Ireland also ramped up restrictions.

The moves follow a partial lockdown in the Netherlands and increasingly strict measures in Britain.

The crisis comes after hopes for a vaccine were dealt a blow by news that Johnson & Johnson had halted advanced trials after a volunteer fell ill, while Eli Lilly paused work on a treatment.

“The European Covid situation has been deteriorating again this week and more and more countries are introducing strict containment measures,” said Gorilla Trades strategist Ken Berman.

“France, Spain, Italy, the UK, and Germany are all under pressure, and since the recent economic releases already showed worrisome trends, the contingent might be heading for a rough winter.”

Tokyo suffered steep losses, while Mumbai, Taipei, Manila and Wellington were also in the red. Singapore and Hong Kong were both well down, with little reaction from news that the two cities’ governments were pushing ahead with plans to open a travel bubble in a first for Asia.

Seoul lost 0.8 percent, though shares in Big Hit Entertainment -- the management agency of K-pop sensation BTS -- more than doubled on their debut after the initial public offering was more than 600 times oversubscribed.

The firm soared from its IPO price of 135,000 won ($118) to its daily limit of 351,000 won before settling back to end at 258,000 won -- giving it a market capitalisation of $7.6 billion and putting it among South Korea’s top 40 most valuable companies.

London, Paris and Frankfurt all tumbled around two percent in the morning.

The pound was struggling ahead of a European Union summit where leaders will discuss post-Brexit trade talks, with Prime Minister Boris Johnson urging them to give ground or see Britain walk away with no deal.

While talks are stuck on fishing quotas and fair competition rules, EU officials say they believe an agreement can be found but do not recognise London’s Thursday deadline for a deal and say they will not make one “at any price”.

Wall Street closed lower on Wednesday following downbeat comments from lawmakers on the possibility of new stimulus for the struggling US economy, as well as continued fear of the coronavirus.

The benchmark Dow Jones Industrial Average dropped 0.6 per cent to 28,514.00, while the broad-based S&P 500 lost 0.7 percent to end at 3,488.67.

The tech-rich Nasdaq Composite Index closed at 11,768.73 after losing 0.8 per cent.

Traders have spent months hoping lawmakers in Washington would deliver another shot of financing to the economy as it recovers from the coronavirus downturn, but in an interview Wednesday Treasury Secretary Steven Mnuchin said he was “far apart” with Democrats in negotiations.

Equities had opened cautiously higher after losing ground Tuesday, but went into the red following Mnuchin’s comments, even though he said he would continue talking with Democratic House Speaker Nancy Pelosi.

“When Mnuchin commented over the stimulus, it hit the wire and the market sold off,” said Quincy Krosby, chief market strategist at Prudential.

Also spooking investors was Johnson & Johnson’s announcement this week that they had to pause their coronavirus vaccine trial after a participant became ill. Eli Lilly’s vaccine trial also was halted over an unspecified safety concern.

The announcements “had a dampening effect on the market that is looking for signs and positive announcements,” Krosby said.

Agencies