London (AFP) – Fears of a second coronavirus wave and downbeat comments by the head of the US Federal Reserve helped push stocks lower on Wednesday.

Wall Street’s main indices slid after Fed chief Jerome Powell said the US economic recovery may be slower than desired in the aftermath of the pandemic, but should rebound “substantially” once the outbreak is reined in.

As the shutdowns drag on, they could cause “lasting damage” to the US economy and more policies may be needed to deal with that possibility, including spending beyond the nearly $3 trillion already approved by Congress, he warned.

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.”

European stocks were also being 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 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.”

In the eurozone, Paris slumped by 2.9 percent and Frankfurt by 2.6 percent.

Meanwhile, London’s benchmark FTSE 100 index shed 1.5 percent as official data showed the British economy contracted by 2.0 percent 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-percent contraction.

Asian equities also 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 batter any economic recovery.

Sentiment was also dented after lawmakers in Washington proposed giving the president powers to impose fresh sanctions if Beijing does not give a “full accounting” for 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 realised the data also showed very weak processing by refineries, an indication that demand by consumers has yet to pick up.

Key figures around 1530 GMT

London – FTSE 100: DOWN 1.5 percent at 5,904.05 points (close)

Frankfurt – DAX 30: DOWN 2.6 percent at 10,542.66 (close)

Paris – CAC 40: DOWN 2.9 percent at 4,344.95 (close)

Madrid – IBEX 35: DOWN 1.9 percent at 6,631.40 (close)

Milan – FTSE MIB: DOWN 2.1 percent at 17,183.44 (close)

EURO STOXX 50: DOWN 2.6 percent at 2,810.24

New York – Dow: DOWN 1.3 percent at 23,447.04

Tokyo – Nikkei 225: DOWN 0.5 percent at 20,267.05 (close)

Hong Kong – Hang Seng: DOWN 0.3 percent at 24,180.30 (close)

Shanghai – Composite: UP 0.2 percent at 2,898.05 (close)

Brent North Sea crude: DOWN 1.0 percent at $29.69 per barrel

West Texas Intermediate: DOWN 1.2 percent at $25.46 per barrel

Euro/dollar: DOWN at $1.0832 from $1.0848 at 2100 GMT

Dollar/yen: DOWN at 107.03 yen from 107.14

Pound/dollar: DOWN at $1.2224 from $1.2260

Euro/pound: UP at 88.63 pence from 88.49 pence


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