U.S. stock futures and European equities retreated Thursday, reflecting continued volatility in markets as investors around the world remained jittery about the economic fallout from the coronavirus outbreak.
Futures linked to the Dow Jones Industrial Average dropped 1.8%, suggesting that gauge for blue-chip stocks may give up some of the gains made Wednesday when trading opens in New York. Benchmark U.S. equity indexes had rallied sharply following a strong Super Tuesday performance by former Vice President Joe Biden and growing signs of a coordinated response to the coronavirus.
European stocks also fell, with oil and mining companies, as well as car and plane manufacturers leading the pan-continental Stoxx Europe 600 index down over 1%.
“Much of the volatility we’re seeing is a product of this to and fro, this push and pull about which forces should have the upper hand, the technical impact from Covid-19 or the feel-good factor from policy stimulus,” said Richard McGuire, a rates strategist at Rabobank.
Bond investors also signaled continued anxiety about economic prospects as they piled into safe-haven assets such as U.S. government bonds. The yield on the benchmark 10-year U.S. Treasury drifted down to 0.976%, from 0.994% at the close on Wednesday. Bond yields drop as prices rise.
U.S. stocks are poised to remain turbulent with the Cboe Volatility Index, or VIX, climbing to over 34. The index, sometimes known as Wall Street’s fear gauge, last week topped 40 to hit its highest level since 2011.
With volatility elevated and gauges of investor confidence low, markets are likely to keep swinging, according to Olivier d’Assier, head of applied research for Asia-Pacific at a financial analytics firm Qontigo.
“We are going to be stuck in this for a while” Mr. d’Assier said. “You’ve got short-term traders buying on the stimulus and then you have medium- and long-term investors de-risking.”
Investor sentiment had shown signs of improvement Wednesday after U.S. lawmakers passed an $8 billion-emergency spending package on Wednesday to combat the coronavirus. Meanwhile, the International Monetary Fund detailed the $50 billion in lending programs it has that could help countries grappling with the virus.
Most Asian markets rose Thursday, with the Shanghai Composite Index and Hong Kong’s Hang Seng Index both closing up around 2%.
Eli Lee, head of investment strategy at Bank of Singapore, said he viewed recent market action as noise. “The rebound is the latest in a series of gyrations we’ve seen, and reflects the fact equities were likely oversold,” he said.
Mr. Lee said a coordinated international monetary and fiscal response would help boost financial conditions and investor sentiment, but added: “These are ultimately very blunt tools against a medical crisis that is poised to cause a sharp shock to consumer demand and production.”
Shares rose in Asia early Thursday.
Photo: kazuhiro nogi/Agence France-Presse/Getty ImagesIn commodities, Brent crude, the global oil benchmark, wavered between gains and losses before edging down 0.7%. Members of the Organization of the Petroleum Exporting Countries are gathering for a two-day meeting in Vienna to begin discussions on cutting output in response to the impact the virus is having on global oil demand.
Among European equities, shares in Continental dropped 10% in Frankfurt after the car-parts maker said it swung to a pretax loss in 2019.
Later in the day, investors will be watching closely as Bank of England Gov. Mark Carney is scheduled to speak. The U.K. economy is facing twin hurdles in the form of the virus and headwinds from the Brexit negotiations with the European Union.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Chong Koh Ping at chong.kohping@wsj.com
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