European stocks slid on Tuesday morning, as a flare-up in US-China tensions, new lockdown rules in California and a coronavirus second wave warning in the UK spooked investors.
The pan-European STOXX 600 index (^STOXX) and France’s CAC 40 (^FCHI) slid by 1.5% in early trading, while Germany’s DAX (^GDAXI) dropped by 1.4%. Britain’s FTSE 100 (^FTSE) declined by 0.8% after two days of gains.
A new report for the UK government said a “reasonable worst-case scenario” could see 120,000 hospital deaths in a second wave of the pandemic this winter. Official figures on Tuesday also showed Britain’s economy recovering far slower than expected in May, while the government will today (14 July) order customers to wear face coverings in shops in England from later this month.
The World Health Organisation (WHO) sounded the alarm about the global COVID-19 outlook on Tuesday. It warned the pandemic will worsen if governments fail to provide clear, comprehensive strategies to suppress it.
Other global developments weighed on stocks. California’s governor Gavin Newsom reversed a reopening of the state’s economy to get a grip on the pandemic, ordering bars to close and restaurants and cinemas to stop indoor openings. The announcement hit US stocks on Monday and Asian stocks overnight.
Markets in the US closed lower as it sparked “concerns that the continued rise in infection cases will prompt more US states to push back their re-opening plans,” according to Michael Hewson, chief market analyst at CMC Markets.
Political tensions also rattled markets. Relations between the US and China took a fresh blow as the US rejected China’s claim to offshore resources in the South China Sea, Reuters reports.
Shanghai’s SSE Composite Index (^SSEC) fell by 0.8% on Tuesday, while Hong Kong’s Hang Seng Index (^HSI) lost 1.6% as it increased lockdown curbs to stem a rise in cases. Japan’s Nikkei 225 (^N225) shed 0.9%.
Futures were pointing to a flat open for US stocks on Friday. S&P 500 futures (ES=F), Dow Jones Industrial Average futures (YM=F) and Nasdaq futures (NQ=F) were all unchanged at around 4am eastern time in the US.