Global equity markets were hammered Thursday as Japan's decision to bar fans from the Olympics focused attention on the continued threat from Covid-19 to the global recovery.
After an ugly day in Europe and Asia, Wall Street stocks opened sharply lower shortly after the Japanese Olympic minister's announcement, which followed a move to put Tokyo under a virus state of emergency from July 12 to August 22.
The action came as Tunisia's health ministry spokeswoman called the effect of the virus on the country "catastrophic," while France warned nationals against traveling to Spain or Portugal on vacation because of a spike in cases.
"There's a growing concern about global growth," said Chris Low of FHN Financial, who also cited a shift towards monetary easing by top Chinese officials as illustrative of concerns about the economic outlook.
US stocks ultimately recovered somewhat from their session lows, but all three major indices ended solidly down, with the Dow shedding 0.8 percent.
David Kotok, chief investment officer at Cumberland Advisors, predicted in a note that US growth would "slow substantially" in the second half of 2021, saying the drivers of outsized activity in the first semester have already passed.
The firm is adjusting its investment approach, he said.
"In the first half of this year, we achieved the results that we anticipated we would achieve for the entire year. Actually, we exceeded them in many accounts," Kotok wrote. "So, the question becomes, do you put some in the bank?
"In our view, the answer is yes."
But David Jones, chief market strategist at European investment trading platform Capital.com, noted that US stocks bounced somewhat from their lows Thursday, a pattern that also held for oil prices, which rallied on Thursday.
Worries about the pandemic and an abrupt shift in central bank policy "don't look big enough just yet to spook markets and cause a more sustainable sell-off," Jones wrote.
"For now, markets still look to be undeterred — although that can be a dangerous belief to hold onto indefinitely. Just ask a Bitcoin buyer from April."
In Europe, major bourses closed with losses of more than 1.5 percent as the European Central Bank revised its inflation target slightly higher, saying in a statement that there might be a "transitory period in which inflation is moderately above target."
IG analyst Josh Mahony said: "Despite the expectation that we should be filled with optimism over a second-half rebound, we are instead seeing traders focus on the bumpy road ahead and implications of rising inflation levels."
– Key figures around 2115 GMT –
New York – DOW: DOWN 0.8 percent at 34,421.93 (close)
New York – S&P 500: DOWN 0.9 percent at 4,320.82 (close)
New York – Nasdaq: DOWN 0.7 percent at 14,559.78 (close)
London – FTSE 100: DOWN 1.7 percent at 7,030.66 (close)
Frankfurt – DAX 30: DOWN 1.7 percent at 15,420.64 (close)
Paris – CAC 40: DOWN 2.0 percent at 6,396.73 (close)
Euro Stoxx 50: DOWN 2.1 percent at 3,991.66 (close)
Tokyo – Nikkei 225: DOWN 0.9 percent at 28,118.03 (close)
Hong Kong – Hang Seng Index: DOWN 2.9 percent at 27,153.13 (close)
Shanghai – Composite: DOWN 0.8 percent at 3,525.50 (close)
Euro/dollar: UP at $1.1850 from $1.1790 at 2100 GMT Wednesday
Pound/dollar: DOWN at $1.3785 from $1.3801
Euro/pound: UP at 85.90 pence from 85.43 pence
Dollar/yen: DOWN at 109.73 yen from 109.99 yen
Brent North Sea crude: UP 0.9 percent at $74.12 per barrel
West Texas Intermediate: UP 1.0 percent at $72.94 per barrel