Global Stocks Drop on Growing Virus Concerns

London, Jan 27 (AFP/APP): Global stock markets sank Wednesday as coronavirus-linked fears eclipsed stimulus hopes and investors waited for news from US Federal Reserve head Jerome Powell, dealers said.

Investors also trod warily as the IMF warned that financial markets might be too complacent about current conditions.

“Sentiment has been hurt in part due to concerns about the vaccine delays in Europe, while profit-taking ahead of key technology earnings reports and the conclusion of the Federal Reserve’s policy meeting also weighed on asset prices,” remarked Fawad Razaqzada at ThinkMarkets.

The dollar rose against the euro before the Fed’s latest decision on interest rates, which are forecast to be held at rock-bottom given the pandemic uncertainties. Investors will then follow Fed Chair Powell’s press conference for clues on the outlook for US monetary policy. However, there seems little chance of new Fed stimulus because new US President Joe Biden has already proposed a gigantic $1.9 trillion rescue package to boost the nation’s economy.

Meanwhile, investors might have become overly complacent about financial conditions, raising the risk of a sharp downturn, the International Monetary Fund warned. “Financial stability risks have been in check so far, but we cannot take this for granted,” cautioned Tobias Adrian, head of the IMF’s Monetary and Capital Markets Department.

With new, more transmissible versions of the coronavirus spreading rapidly, governments are being forced to reimpose strict containment measures and their efforts to administer jabs are being hampered by distribution problems. Observers said that while the overall outlook was positive — the IMF has lifted its 2021 global growth forecasts — the first few months of the year could be painful.

Earlier in the day, Asian equities struggled to rebound from a sell-off on Tuesday. Hong Kong fell again after being battered by the Chinese central bank’s decision to take funds out of the financial system to prevent an asset bubble.

Key figures around 1440 GMT