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Fears of second virus outbreak hit US shares Fears of second virus outbreak hit shares
(about 3 hours later)
Financial markets have slumped amid fears that an uptick in coronavirus cases will hurt the economic recovery. Financial markets have tumbled amid fears that an uptick in coronavirus cases will hurt the economic recovery.
The falls come a day after America's central bank said the US faces a long road to recovery. In the US, the three main financial indexes saw their worst day in weeks, with the Dow Jones Industrial Average down almost 7%.
In the US, the three main financial indexes saw their worst day in weeks, with the Dow Jones Industrial Average down more than 5% at mid-day. The decline came a day after America's central bank said the US faces a long road to recovery.
The steep falls follow a weeks-long rally that had helped shares recover some ground from March lows. They follow a weeks-long rally that had helped shares recover some ground from March lows.
European shares also dropped, with the UK's FTSE 100 sinking about 4%.
Energy and travel stocks were among the biggest losers, as oil prices also took a hit.Energy and travel stocks were among the biggest losers, as oil prices also took a hit.
The falls came as Arizona and South Carolina were among several states in the US where the number of cases was on the rise. Earlier, European and Asian shares also dropped, with the UK's FTSE 100 sinking about 4%. In Germany, the Dax fell 4.4%, while in France the CAC 40 ended 4.4% lower.
Slow recoverySlow recovery
Hopes that the economy will rebound, as authorities loosen the tough controls put in place to try to slow the spread of the virus, helped lift share prices from their March lows. The Nasdaq has even hit new highs this week. Share prices had rallied amid hopes that the economy will rebound, as authorities loosen the controls put in place to try to slow the spread of the virus.
But Federal Reserve Chair Jerome Powell warned this week that the US faces a "long road" to recovery. Last week's surprise report showing US employers had restarted hiring in May had helped to push the Nasdaq to new highs.
On Thursday, the US Labor Department reported that another 1.5 million people had filed new unemployment claims last week. More than 30 million continue to collect the benefits, it said. But on Thursday, the US Labor Department reported that another 1.5 million people had filed new unemployment claims last week. More than 30 million continue to collect the benefits, it said.
Policymakers at the Fed said they expected the unemployment rate to remain above 9% at the end of the year - close to the worst level of the financial crisis. The unemployment rate could remain above 9% at the end of the year - close to the worst level of the financial crisis, policymakers at the Federal Reserve said on Wednesday.
Should infection and hospitalisation rates worsen, it will hurt the recovery, Mr Powell said. Bank chair Jerome Powell warned that assessment may prove optimistic, should infection and hospitalisation rates worsen.
"It could hurt the recovery, even if you don't have a national level pandemic. Just a series of local ones, of local spikes, could have the effect of undermining people's confidence in travelling, in restaurants and in entertainment," he said. "It would not be a positive development."
His comments came amid a rise in coronavirus cases in several US states, including Arizona and South Carolina.
The Dow dropped 1,861.8 points or 6.9% to end at 25,128, while the S&P 500 slid 188 points or 5.9% to 3,002.1. The Nasdaq closed 527.6 points lower or 5.2% at 9,492.7.
Treasury Secretary Steven Mnuchin said he did not want to see a return of the lockdowns that kept the world's largest economy frozen for weeks this spring.Treasury Secretary Steven Mnuchin said he did not want to see a return of the lockdowns that kept the world's largest economy frozen for weeks this spring.
But economists have warned that people will stay home voluntarily if they are afraid of getting sick. But economists have warned that people will stay home voluntarily if they are afraid of becoming ill.