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Global stocks plunge on virus restrictions, US jobs data

Germany's share index DAX is displayed on a board at the stock exchange in Frankfurt am Main, western Germany. The Frankfurt Stock Exchange opened lower on October 13, 2020, with the Dax losing 1.56% and falling below the symbolic 13,000 point mark, in a market worried about the worsening health crisis in Europe. / AFP / Daniel ROLAND

NEW YORK, Oct 15, 2020 (AFP) – Global stock markets plunged Thursday, with investor sentiment hammered by fears that tighter coronavirus restrictions could derail the tentative economic recovery.

In London, equities closed 1.7 percent lower after the British government announced that the capital faces more stringent coronavirus restrictions as case numbers rise.

Paris suffered a drop of more than 2.0 percent after the French government announced a curfew for the capital and eight other cities — covering almost a third of the country’s population — for as long as six weeks.

And Frankfurt stocks lost 2.5 percent after Germany also ramped up Covid-19 restrictions, while the EU’s disease control agency labeled more than half of the bloc’s member states as red zones in a new map to guide countries’ decisions on travel restrictions.

“Dealers are dumping stocks for fear that economic activity will drop off because of the tighter restrictions in various parts of Europe,” said CMC Markets analyst David Madden.

“The latest restrictions are likely to hamper Europe’s economic recovery — which was already running out of steam before the health woes ramped up again.”

Across the Atlantic, the Dow fell 0.1 percent and the tech heavy Nasdaq slumped half a percentage point amid a slew of unwelcome news.

Labor Department data showed new applications for US jobless benefits rose to a seven-week high of 898,000 last week, an increase of 53,000.

That was the sharpest rise in seasonally-adjusted initial claims in two months as the United States attempts to recover from mass layoffs caused by virus-related business shutdowns earlier this year.

The deadlock over additional US stimulus spending was also set to continue, with Treasury Secretary Steven Mnuchin saying a deal is unlikely before the November 3 election.

Asian markets had earlier also closed well deep in the red.

Deadlock everywhere

The pound fell as EU leaders met to discuss post-Brexit trade talks, with Prime Minister Boris Johnson urging them to give ground or see Britain walk away with no deal, while oil prices also struggled.

Equities have been benefiting in recent weeks from investors’ belief Republicans and Democrats will eventually reach a deal on another package of measures to support the US economy.

But this week’s worsening news has taken a toll, with the Dow closing lower the last three sessions.

Analysts said traders are taking comfort from the possibility that Joe Biden and the Democrats will win the presidency and both houses of Congress in the election, paving the way for a bigger stimulus than anything that could be agreed before the vote.