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Stocks fell sharply across the globe on Monday, as rapidly rising case counts of the coronavirus heightened concerns of potential new lockdowns at a time when prospects for new fiscal stimulus from Washington looks increasingly dim.

Canada’s benchmark stock index tumbled 217.20 points, or 1.34 per cent, to its lowest in more than two months, while the Dow Jones Industrial Average - which had been down 900 points at one point in the session before paring losses - closed down 1.84 per cent. The selling pressure was even more intense in Europe, where most key gauges lost over 3 per cent.

Crude oil fell nearly 5 per cent and copper retreated from two-year highs. Even gold, which often benefits during stock market slides as investors seek safe havens, fell during Monday’s session, partly because of resurgence in the U.S .dollar.

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To some investors, the broad-based nature of the sell-off across asset classes rekindled memories of the violent market downturn in March, when lockdowns quickly spread across the globe.

And they were quick to note that Monday’s turbulence isn’t likely to die down any time soon.

“With (coronavirus) numbers already on the rise at an alarming rate, the risk of more restrictions is high,” Craig Erlam, senior market analyst with OANDA Europe, said in a note. “The consumer-led recovery may be put on hold before the situation gets out of hand again.”

“As far as investors are concerned, we’re not seeing the panic we saw last time, but Monday was evidence that they’re not particularly comfortable either,” he added.

The Cboe Volatility Index, known as “Wall Street’s fear gauge,” hit its highest level in nearly two weeks. VIX futures show that investors are betting that market swings will persist beyond the Nov. 3 U.S. presidential election and into December, reflecting worries over the possibility of a contested election and concerns that a deeply divided government will fail to agree on providing more fiscal stimulus to support the U.S. economy.

“It’s not just Election Day that matters to this market,” said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management. “It’s also ‘do we get fiscal stimulus or do we not?’”

Those concerns, some investors say, have been sharpened by the death of Supreme Court Justice Ruth Bader Ginsburg, which observers expect to deepen partisan divides as it sets up what promises to be a fierce fight in the U.S. Senate over President Donald Trump’s eventual nominee to replace her.

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“It appears that Democrats' willingness to compromise with their Republican colleagues on stimulus will likely be as low as possible,” said Michael Purves, chief executive of Tallbacken Capital Advisors, in a note to clients.

The U.S. Congress has for weeks remained deadlocked over the size and shape of another coronavirus-response bill, on top of the roughly US$3 trillion already enacted into law.

Federal Reserve Chair Jerome Powell, among others, has stated that the U.S. economic recovery requires additional fiscal support. Such measures have been built into many economic and market forecasts for next year, and its continued absence could lead to further pullbacks in U.S. equities, some investors say.

Wall Street’s main indexes have fallen in the past three weeks as investors dumped big-name technology-related stocks following a stunning rally that returned the S&P 500 and the Nasdaq to record highs.

But in contrast to last week’s downturn, declines Monday were led by value-oriented sectors such as industrials, energy and financials as opposed to technology stocks.

Airline, hotel and cruise companies in the U.S. tracked declines in their European peers as Britain signaled the possibility of a second national lockdown. Europe’s travel and leisure index marked its worst two-day drop since April. In Canada, Air Canada was among the worst decliners in the S&P/TSX Composite Index, falling 8.18%. Economically sensitive base metals producers such as Hudbay Minerals and First Quantum Minerals saw similar declines.

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Among the largest gainers on the Nasdaq 100 was Zoom Video Communications Inc, which rose 6.8 per cent on the prospect that fresh lockdowns would spur greater use of the product.

Quebec and Ontario reported more than 1,000 coronavirus cases between them on Monday, prompting Quebec’s public health director to announce the beginning of a second wave. More than half of U.S. states, meanwhile, are reporting a rise in cases as deaths in that country surpass 200,000. The British government on Sunday reported 4,422 new coronavirus infections, its biggest daily rise since early May. The number of cases has been rising quickly in many European countries and while authorities don’t seem ready to return to the tough restrictions on public life that they imposed in the spring, the new wave of the pandemic threatens the economic outlook.

Tensions between the world’s two largest economies are also weighing on markets. President Donald Trump has targeted Chinese tech companies in particular, and the Department of Commerce on Friday announced a list of prohibitions that could eventually cripple U.S. operations of Chinese-owned apps TikTok and WeChat. That raises the threat of Chinese retaliation against U.S. companies.

With files from Reuters and The Associated Press

Also see: Stocks seeing action Monday - and why

With files from Reuters and The Associated Press

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