By David Randall
NEW YORK (Reuters) - A jump in coronavirus cases in South Korea and Germany rattled investors and sent global equities markets lower on Monday, while safe-haven assets, including the dollar and U.S. Treasuries, edged higher.
The accelerating infection rates come as countries ranging from Japan to France are set to emerge from lockdowns that have frozen the global economy.
A second wave of infections would likely snuff out the rally in equity markets as investors position for a severe and prolonged global recession.
"If we do have a second wave and lockdowns, that's almost the worst outcome from an economic perspective," said Guy Miller, chief market strategist at Zurich Insurance Company.
Miller said that would "postpone business investment indefinitely" and see consumers retrench as hopes for a quick economic recovery are dashed.
He said the next two or three weeks would be "pivotal" in demonstrating how businesses and consumers respond to the loosening of lockdown measures.
MSCI's gauge of stocks across the globe (MIWD00000PUS) shed 0.20% following broad declines in Europe and slight gains in Asia.
In midday trading on Wall Street, the Dow Jones Industrial Average (DJI) fell 146.68 points, or 0.6%, to 24,184.64, the S&P 500 (SPX) lost 6.41 points, or 0.22%, to 2,923.39 and the Nasdaq Composite (IXIC) added 39.32 points, or 0.43%, to 9,160.64.
Increasing trade tensions between the United States and China will also likely weigh on investor sentiment given the outsized rally that has pushed the benchmark S&P 500 up nearly 30% since its March lows, said Frédérique Carrier, head of investment strategy at RBC Wealth Management.
"We think it is unlikely the Trump administration would willingly unleash a new trade war that would crimp an economic recovery, but the possibility of missteps remains," she said.
Bond markets signaled that a global economic recovery will be slow. Two-year U.S. government bond yields (US2YT=RR) have hit record lows at 0.105% and Fed fund futures <0#FF:> last week turned negative for the first time ever. [US/]
Benchmark 10-year notes (US10YT=RR) last fell 1/32 in price to yield 0.6844%, from 0.681% late on Friday.
"Markets focus on reopening economies and policy activism, [while] bears struggle to understand how they can ignore reinfection and economic destruction," said Kit Juckes, a markets strategist at Societe Generale (PA:SOGN).
In commodity markets, oil prices slid as the pandemic eroded global demand. [O/R]
U.S. crude (CLc1) recently fell 1.09% to $24.47 per barrel and Brent (LCOc1) was at $29.98, down 3.2% on the day.