June 18, 2020 / 12:22 PM / 23 days ago

GLOBAL MARKETS-World stocks drift lower as second wave virus fears mount

* European equities rally turns sour

* Investors fret over infections in U.S, Germany, China

* Wirecard shares plunge 60%

* Graphic: World FX rates tmsnrt.rs/2egbfVh

By Tom Arnold and Hideyuki Sano

LONDON/TOKYO, June 18 (Reuters) - Global stocks drifted lower on Thursday as an increase in new coronavirus cases in some U.S. states and China crushed hopes of a swift world economic comeback from the pandemic.

Beijing, hit in recent days by its largest number of infections since early February, has brought its latest coronavirus outbreak under control, a Chinese medical expert said on Thursday.

Several U.S. states including Oklahoma, where President Donald Trump plans a campaign rally on Saturday, reported a surge in new coronavirus infections.

The daily count of infections also hit a new benchmark in California and Texas, while around 400 workers tested positive for the virus at an abattoir in northern Germany, prompting the closure of local schools.

“We were worried about a second wave and you are seeing worrying signs in some states in the U.S., some flare-ups in Germany and China,” Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

“It’s going to be a theme where we see economies having to do mini-lockdowns and isolation measures in order to contain the virus. The question is how much it affects markets.”

MSCI’s broadest index of World shares was 0.2% lower. The pan-European STOXX 600 was 1.1% lower, as its rally earlier in the week petered out.

Shares in Wirecard plunged by 60% in Frankfurt trading, wiping 8 billion euros off its market worth after the firm’s auditor refused to sign off its 2019 accounts over a missing $2.1 billion. Creditors could call in loans as soon as Friday.

S&P 500 mini futures were 0.6% down.

CHINESE BRIGHT SPOT

China’s blue-chip CSI300 shares were a bright spot, earlier adding 0.7%, helped by reassurances from its central bank governor that the world’s second largest economy would maintain ample financial system liquidity in the second half of 2020 as the economy recovers.

Euro zone bonds hardly budged, even as the European Central Bank announced record demand for its new round of cheap loans, with the strong take-up expected to support the bond market.

Italian yields slipped slightly, with 10-year yields falling to a new low since late March of 1.33%. They were last down 3 basis points to 1.35%.

British government bond yields touched their highest since June 10 after the Bank of England increased its bond-buying programme by a further 100 billion pounds ($125 billion) to help revive the economy, but sharply slowed the pace of its purchases.

Some investors remain worried about further paralysis in Washington as Trump’s former national security adviser John Bolton accused him of sweeping misdeeds that included explicitly seeking Chinese President Xi Jinping’s help to win re-election.

Border tensions between North and South Korea, and between India and China, also helped sour sentiment for risky assets.

“In the near-term, we have had a lot of risk-off factors including Bolton and geopolitical tensions in Asia,” said Masahiko Loo, portfolio manager at AllianceBernstein in Tokyo.

In currency markets, the safe-haven Japanese yen earlier touched a six-day high of 106.70 in Asian trading and was last trading neutral at 107.

The Norwegian crown was up 0.6% versus the dollar at 9.4560 and by 0.5% versus the euro at 10.6430.

The euro was also hardly changed against the greenback, at $1.1250.

The British pound remained firmly in negative territory despite the Bank of England increasing its bond-buying scheme. It was 0.4% down against the dollar at $1.2508 and 0.4% down against the euro at 89.85 pence.

The Australian dollar fell 0.3% to $0.6864, hit by worse than expected employment data.

Australia’s unemployment rate jumped to the highest in about two decades in May as nearly a quarter of a million people lost their jobs due to the coronavirus pandemic-driven shutdowns.

Oil prices recovered from losses earlier in the session, with U.S. crude futures up 15 cents to $38.11 per barrel, while international benchmark Brent added 34 cents to $41.05 a barrel.

In commodity markets, gold was up 0.3% at $1,721.04 per ounce.

Additional reporting by Sujata Rao; Editing by Toby Chopra and Gareth Jones

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