US: Stocks slump on Fed comments, fears of second coronavirus wave

[NEW YORK] Fears of a second coronavirus wave and downbeat comments by the head of the US Federal Reserve helped push US stocks lower on Wednesday.

Wall Street's main indices slid after Fed chair Jerome Powell warned the economic outlook was "highly uncertain" and said Washington may need to spend beyond the nearly US$3 trillion already approved by Congress.

Chris Beauchamp, chief market analyst at online trading firm IG, said that "while Jerome Powell hinted at more measures to support the US economy, his warning about the speed of the recovery has sapped bullish sentiment."

Edward Moya at online currency trading firm Oanda said Powell's "downbeat remarks... burst the risk appetite balloon for many investors."

Major US indices ended lower for a second straight session, with the Dow shedding 2.2 per cent.

European stocks were also mauled over concerns of a second wave of virus infections.

The recent optimism that has flowed through markets - helped by trillions of dollars in worldwide stimulus and central bank backstopping - has been given a jolt by data showing fresh outbreaks in South Korea, China and Germany.

"Traders remain worried about the possibility of Covid-19 cases rising again as governments ease their restrictions in relation to the lockdowns," said market analyst David Madden at CMC Markets UK.

IG's Mr Beauchamp said that the "resurgence of virus concerns can be seen in the list of FTSE 100 stocks that are deep in the red today. Carnival, Rolls-Royce, Intercontinental Hotels and Compass are all in the line of fire if the push to reopen economies reverses and lockdowns return."

QUARTERLY CARNAGE

In the euro zone, Paris slumped by 2.9 per cent and Frankfurt by 2.6 per cent.

Meanwhile, London's benchmark FTSE 100 index shed 1.5 per cent as official data showed the British economy contracted by 2.0 per cent in the first quarter on the back of the COVID-19 outbreak.

That was the worst quarterly slump since the depths of the global financial crisis in 2008, although the figure was better than analysts' expectations of a 2.5 per cent contraction.

Asian equities fell again after US President Donald Trump's top coronavirus adviser warned Tuesday that easing lockdown measures too early could spark another dangerous wave of infections and forestall any economic recovery.

Sentiment was also dented after lawmakers in Washington on Tuesday proposed giving the president powers to impose fresh sanctions if Beijing does not give a "full accounting" of the coronavirus outbreak.

Oil prices popped higher after data showed a surprise drop in US crude reserves, a signal that producers are reducing the oversupply in the market.

However, they fell back after investors realized the data also showed very weak processing by refineries, an indication that demand by consumers has yet to pick up.

AFP