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Another record U.S. virus count curbs risk appetite


© Reuters. A man wearing protective face mask walks in front of a stock quotation board outside a brokerage in Tokyo

By Thyagaraju Adinarayan

LONDON (Reuters) – World stocks and oil prices were faltering on Friday as record-setting new coronavirus cases in several U.S. states led to worries that more lockdowns may be necessary, making a quick economic recovery unlikely.

The upcoming second-quarter earnings season, expected to be the worst for Europe and the United States since the 2008/09 financial crisis, added to the woes, pushing investors to chase safe-haven assets, such as U.S. Treasuries and the yen.

European stocks declined 0.3%, taking cues from Asia, where China ended its rally. Shares in China () fell 1.8% from a five-year high, as state media discouraged retail investors from chasing the market higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan () fell 1.3%. Australian stocks () declined by 0.6% as an extension of loan-payment deferrals hit the banking sector. Japanese stocks () were down by 1.1%.

The e-mini futures for the S&P 500 erased early gains to trade down 0.6%.

More than 60,500 new coronavirus infections were reported across the United States on Thursday, the largest single-day tally of cases by any country since the virus emerged late last year in China.

Graphic – Stocks, oil and coronavirus cases https://fingfx.thomsonreuters.com/gfx/buzz/nmovajrmzpa/Pasted%20image%201594367152428.png

“The sharp increase in confirmed cases has led to growing concerns that a return to broad lockdowns lies ahead,” Goldman Sachs (NYSE:) wrote in a note. “While lockdowns can slow down virus spread effectively, they come at very high economic cost.”

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Some Asian cities that had appeared to have contained the disease, such as Tokyo, Hong Kong and Melbourne, have also seen a spike in cases, prompting investors to take shelter in safe-haven assets.

In the currency market, the yen rose 0.4% against the dollar and 0.5% versus the euro (). U.S. Treasury yields () dipped to their lowest levels since late April.

Gold was the only safe haven that didn’t join the rush-for-safety party, sliding 0.3%, a day after hitting an eight-year high.

While economic data continued to improve, with the number of Americans filing for jobless benefits dropping to a near four-month low last week, investors remained cautious. A record 32.9 million people were still collecting unemployment checks.

On Thursday, the Dow Jones Industrial Average () fell 1.39% and the S&P 500 () dropped 0.56%, but the tech-heavy Nasdaq () rose 0.53% to its fifth record closing high in six days.

In other moves, the Australian and New Zealand dollars , which are often traded as a liquid proxy for risk because of their close ties to China’s economy, both fell against the greenback.

The also fell as local officials use lockdowns and border restrictions to contain a sudden increase in coronavirus cases.

U.S. crude oil () fell 2% to $38.81 a barrel and Brent crude () fell 1.7% to $41.63 per barrel amid concern about a long-term decline in global energy demand.

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