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Asian markets mostly fell Thursday after a meltdown in New York and Europe sparked by France reimposing a nationwide coronavirus lockdown, with fears other major economies could follow suit.
With sentiment already dampened by US lawmakers' failure to pass a new stimulus and election uncertainty, the news out of Paris was the last thing investors wanted to hear as the recovery from this year's global financial rout was already stuttering.
France's President Emmanuel Macron's decision to shut down the country for a month came as Germany said it would impose drastic new curbs as experts warned hospitals would soon be overwhelmed.
The moves followed weeks of exponentially rising new infections across Europe that have forced governments across the continent to put containment measures in place, with warnings that Britain could be next.
The announcements pummelled European markets Wednesday with Frankfurt diving more than four percent and Paris more than 3%. All three major indexes on Wall Street fell more than three percent as equities suffered one of their worst sessions since the dark days of February-March.
Tokyo, Hong Kong, Seoul, Singapore, Bangkok and Wellington all fell, with Sydney and Taipei losing more than one percent each. Manila shed two percent, though Mumbai edged up.
"Market sentiment is turning, with investors buffeted by US election uncertainty and now economic worries from rising Covid-19 cases across Europe, sparking concerns that measures to control the virus will hamper economic activity," said Kerry Craig at JP Morgan Asset Management.
Shanghai edged up following reports Joe Biden, who is well ahead of Donald Trump in national and battleground polls, will reconsider the president's tariffs on Chinese imports.
"The price action in Shanghai suggests that all of Biden's allies will tell him to get rid of Chinese tariffs," said OANDA's Jeffrey Halley.
Lori Heinel, of State Street Global Advisors, added: "And then you've got the lack of stimulus, which in our estimation is still necessary to get us through this period until we get an ultimate medical solution."
However, while the mood on trading floors was downbeat, analysts said markets were unlikely to return to their March lows, buoyed by vast sums in central bank support and expectations that a US stimulus will eventually get passed.
"Downside risks to the economic outlook have increased to magnitude 10," said Axi's Stephen Innes.
"But what always tends to come through like a chocolate cake with a cherry on top, especially when the markets are in their deepest despair, is that stimulus always seems to save the day."
And JP Morgan's Craig said the long-term economic recovery "still looks solid" and "the drag on economic activity in Europe will be less severe than in April".
Oil prices slipped again, having cratered 5% Wednesday on fears that new lockdowns will again hammer demand.
And Innes warned: "The return of the 'sudden stop' economic nightmare will play a considerable role in the oil market's mindscapes over the next few weeks, and it is this fear that keeps traders awake at night."
Traders are keeping an eye on the release of US economic growth data for the third quarter, which is released later in the day, with estimates for a surge of about 30 percent.
However, observers point out that that was helped by a multi-trillion-dollar rescue package, which has now run out.
London, Paris and Frankfurt edged up at the open.
