Equities sink, bonds rise for third day on recovery fears

Michelle K. Wallace

NEW YORK (Reuters) – World stock markets fell for a third day on Thursday and safe-haven bonds rose as disappointing U.S. jobs data and signals by central banks that further government stimulus may be needed stoked investor worries about the global economic recovery.

Stock markets have rallied more than 30% since their March lows following unprecedented government stimulus measures and central bank interventions to counter the impact of economic lockdowns. Federal Reserve Chairman Jerome Powell quashed talk of U.S. interest rates going negative to kickstart investment.

Like the Fed, Bank of England chief Andrew Bailey said Thursday it wasn’t considering “the very big step” of sub-zero rates, while the Bank of Japan said it wasn’t planning to go even deeper into negative territory.

“It’s a relatively risk-off day again,” said Societe Generale’s Kit Juckes, highlighting that as well as Powell, the top U.S. infectious diseases expert Anthony Fauci had warned that getting the novel coronavirus outbreak under control would take time.

“I think there is a sense of realization that the steep V-shaped recovery isn’t going to happen,” Juckes added. “But a third day of this (selling) might make people optically looking at the equity charts a bit worried.”

MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 1.00% following broad declines in Europe and Asia.

In midday trading on Wall Street, the Dow Jones Industrial Average .DJI was up 45.64 points, or 0.2%, at 23,293.61, the S&P 500 .SPX lost 5.77 points, or 0.20%, to 2,814.23 and the Nasdaq Composite .IXIC dropped 53.39 points, or 0.6%, to 8,809.78.

In the U.S., initial claims for state unemployment benefits totaled a seasonally adjusted 2.981 million for the week ended May 9, the Labor Department said on Thursday, nearly 500,000 more than anticipated by economists polled by Reuters.

“The stock market has given the bad economic data a pass ever since the Federal Reserve and Federal government stepped in with massive amounts of stimulus in March, but the tide seems to be turning and markets could take another leg lower as the headline numbers continue to jolt investors,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Safe haven assets such as the dollar and government bonds edged higher. The dollar index =USD rose 0.27%, with the euro EUR= down 0.29% to $1.0785.

Benchmark 10-year notes US10YT=RR last rose 13/32 in price to yield 0.6105%, from 0.651% late on Wednesday.

“Absent notable news on vaccine front, it’s hard to envision a scenario where the market goes up significantly from here,” said Brian Price, head of investments at Commonwealth Financial Network. “I would say the same from the down side.”

China has reimposed movement restrictions near its borders with North Korea and Russia after a new outbreak was detected there and South Korea was working to contain an outbreak centered around bars and nightclubs in Seoul.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

“It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away,” WHO emergencies expert Mike Ryan told an online briefing on Wednesday.

A dip in U.S. crude stockpiles helped push oil prices higher. The International Energy Agency (IEA) estimated oil demand will see a record fall in 2020, keeping Brent just below $30 a barrel. [O/R]

U.S. crude CLc1 recently rose 3.56% to $26.19 per barrel and Brent LCOc1 was at $30.33, up 3.91% on the day.

Reporting by David Randall; additional reporting by Jessica DiNapoli; Editing by Bernadette Baum

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