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News24.com | Stocks drop on surge in virus cases, elusive US stimulus

Globe with digital tablet, laptop and smartphone showing international markets.

Globe with digital tablet, laptop and smartphone showing international markets.

Stock markets retreated Monday with traders increasingly pessimistic that US lawmakers will pass a new stimulus package before next week's election, while spiking virus cases fanned worries about the economic impact of new containment measures.

Despite months of arduous talks in Washington, there appears to be little chance Republicans and Democrats will hammer out a rescue deal to help cash-strapped Americans, with both sides blaming each other for the impasse.

Analysts said investors had essentially given up hope of an agreement and were now betting on Joe Biden and a Democratic sweep of Congress that would open the way for an even bigger spending package in the new year.

Adding to the negative sentiment is a surge of coronavirus cases across the United States and Europe, with the World Health Organization on Sunday reporting a third straight day of record new infections globally.

"Rising Covid cases, no US stimulus and an election next week isn't exactly the recipe for a strong week for equity markets," said Craig Erlam, senior market analyst at Oanda trading group.

"I expect plenty of caution this week," he told AFP, adding that the Frankfurt index was being weighed down much more than European rivals because of a 20% drop in the share price of SAP.

The German software giant on Sunday downgraded its outlook for 2020, saying a resurgence in coronavirus cases would weigh on demand from "hard hit" customers.

In afternoon deals, Frankfurt's DAX 30 was down 2.7%, while London lost 0.1% and Paris was 1.0% lower.

Wall Street opened lower, with the Dow falling 1.1%.

Oil prices were off around 2.0%.

The coronavirus has so far claimed 1.1 million lives and infected more than 42 million people around the world.

The new wave has already forced governments in several countries including Britain, Germany and France to reimpose tough restrictions to prevent the disease from spreading.

"Naturally, growth concerns are at the root of the negative bias since the resurgence of the virus threatens more lockdowns and the lack of a stimulus deal threatens to exclude many struggling businesses and households from the economy," said analysts at Briefing.com.

Traders are also keeping tabs on a key policy-setting meeting of China's Communist Party this week, which is expected to set the course for the world's second-biggest economy for the next several years with an eye on US relations.

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