* World share index sees first 5-day fall since Feb 2020
* U.S. indexes drop more than 1% in early trading
* Dollar rises broadly but Japanese yen edges up
* Oil prices fall almost 4% after OPEC+ resolves spat
* Government bond yields burrow lower amid COVID angst
(updates prices, quotes)
By Marc Jones
LONDON, July 19 (Reuters) - Risk-aversion ruled on Monday as
a surge in worldwide coronavirus cases sank bond yields and left
stocks facing their longest losing streak since the pandemic
first hit global markets 18 months ago.
Europe's STOXX 600 slid over 2% in its worst
session in seven months; London's FTSE fell a similar
amount to the lowest since mid-May as Britain's "freedom day"
lifting of COVID-19 restrictions was overshadowed by its fully
vaccinated health minister contracting the virus.
The Dow Jones Industrial Average dropped 1.4% in
early U.S. trading, with the S&P 500 and the Nasdaq
Composite nearly matching those falls.
Meanwhile safe-haven government bonds
enjoyed healthy gains, with U.S. 10-year Treasury yields sliding
to new five-month lows while the dollar climbed to a 3-1/2 month
high.
"The big concern for the market is whether we are going to
see a slowdown in the global economic recovery, and this could
be the overriding force which results in a bad period for
equities in the weeks ahead," said Russ Mould, investment
director at brokerage AJ Bell.
In Asia, Japan's Nikkei and Hong Kong's Hang Seng
dropped 1.3% overnight. Cases hit an 11-month high at the
weekend in Singapore, Thailand had its highest single-day
increase since the pandemic began and Sydney's construction
workers were told to down tools after cases rose there as well.
Markets were fretting over whether broader lockdowns might
be needed again and a slowdown in the world's No. 2 economy
China, meaning a recent surge in commodity prices could be
peaking.
Natwest's Global Head of Desk Strategy, John Briggs, said
rising COVID-19 cases would focus markets' mind on which
countries had the highest vaccination rates, their appetite for
social restrictions and their fiscal appetite.
"The U.S. comes out on top of all these," Briggs added. "We
are in a period of renewed U.S. exceptionalism ... So all this
is bullish for the USD."
In Europe, coronavirus angst saw travel and leisure stocks
fall to their lowest level of the year. Shares of
cruiseship operator Carnival, airlines easyJet
and British Airways-owner IAG, and the UK's Restaurant
Group and Cineworld cinema chain all fell
between 5%-6%.
It wasn't just COVID-19 dampening the mood. China's
supersized tech trio Baidu, Alibaba and Tencent had sank 2.5%-3%
overnight after a Shanghai court at the weekend posted a list of
"typical unfair competition cases".
PERMANENTLY CHANGED?
Oil prices slid about 4% after the OPEC group of producing
nations overcame a recent spat and agreed to boost output in a
hastily arranged meeting on Sunday.
Brent crude was down $2.80 at a more than six-week
low of $70.75 a barrel. U.S. crude fell a similar amount
to $68.84 a barrel.
Global economic growth is beginning to show signs of fatigue
as many countries, struggle to curb the highly contagious Delta
variant of the coronavirus.
Investors are also worried about the spectre of elevated
inflation, which the market has long feared.
Economists at Bank of America downgraded their forecast for
U.S. economic growth this year to 6.5%, from 7% previously.
In bond markets, the move to safe-haven assets meant further
falls in yields. Germany's 10-year bond yield hit
its lowest level since late March at -0.351% ahead of an ECB
meeting this week. U.S. 10-year Treasury yields
slipped to 1.21% and have fallen for 11 of the last 15 trading
sessions.
The dollar was also riding high as risk currencies
came under pressure. An index measuring the dollar's value
against a basket of major currencies briefly rose to as high as
93.041, its highest since early April.
But the dollar failed to make any headway against the yen,
with the currency pair trading below the 110 yen per dollar mark
at 109.10, leaving the yen almost 0.9% higher on the day.
Britain's sterling hit a three-month low against the dollar
at $1.3703 after its health minister Sajid Javid
had tested positive for COVID-19. That forced Prime Minister
Boris Johnson and finance minister Rishi Sunak to quarantine on
Sunday.
"Despite rising vaccination rates, a return to pre-corona
normality seems questionable," Ulrich Leuchtmann, head of FX and
commodity research at Commerzbank, wrote in a research note.
(Additional reporting by Karin Strohecker; Editing by Edmund
Blair and Timothy Heritage)
