Stocks Retreat As Virus Fears Temper Lockdown Easing

Global stocks mostly slipped Thursday as investors tallied the economic hit from the coronavirus and assessed the risk to markets of worsening China-US relations.

On Wall Street, the broad-based S&P 500 gave up 0.8 percent following a choppy session, while key eurozone markets were down by more than one percent at the closing bell, with London performing slightly better thanks to a weaker pound.

Stock markets had presented a mixed picture in Asia earlier.

"The prospect of economies reopening and returning to something that resembles normal has, at times, been very positive for markets, as have positive vaccine and treatment trials, but it hasn't all been good news," said Craig Erlam, senior market analyst at Oanda Europe.

"There's been some setbacks in countries previously lauded for their handling of the spread... putting more emphasis on the dreaded second wave if the exit strategy isn't handled properly," Erlam said.

"On top of that, tensions between the US and China have increased dramatically which is making investors nervous."

The eurozone's economic slump, meanwhile, has "likely bottomed out" after the bloc suffered a disastrous collapse under lockdowns to contain coronavirus, a closely-watched survey by IHS Markit showed.

Equities enjoyed weeks of advances thanks to signs the pandemic is easing in major economies and as authorities have gradually lifted lockdowns that are expected to have sent the world into a deep recession.

But that optimism has been tempered by uncertainty about the future, while US President Donald Trump has continued to target China over the outbreak and threatened fresh tariffs on the country, fuelling worries of another trade war between the superpowers.

Trump on Wednesday tweeted that "it was the 'incompetence of China', and nothing else, that did this mass worldwide killing."

Stephen Innes, of AxiCorp, warned that investors might not be taking the simmering tensions seriously enough.

"Markets may be pricing in far too much complacency as the US-China 'phase one' trade deal could be at risk, as the pandemic and resulting acute economic downturn have made China's trade commitment to the US much more challenging to fulfil," he said in a client note.

Meanwhile, the weakening US economy has raised challenges for Trump's reelection campaign.

The Labor Department reported that another 2.43 million US workers applied for unemployment benefits last week, bringing the total since the coronavirus shutdowns began in mid-March to a massive 38.6 million.