Global stock markets sold off Wednesday, as they have all week, on news of new government-ordered lockdowns in Europe amid rising Covid infections. As before, the shutdowns are a blunderbuss response that won’t eliminate the virus, but they will do considerable economic and public-health damage.
Germany, which was supposed to be Europe’s anti-Covid model, ordered a one-month shutdown of restaurants, bars, fitness studies and theaters. Hotels won’t be able to host tourists, and public gatherings can’t be larger than 10 people from two households.
France will begin another national lockdown on Friday requiring people to remain in their homes. At least factories will be able to continue operating, but restaurants, bars and supposedly nonessential shops will have to close by government edict.
French and German leaders say they have no choice lest the country’s hospitals be overrun. Chancellor Angela Merkel said German hospitalizations have doubled in 10 days. “Within weeks, we will reach the limits of our health system,” she said. “It is completely clear that we must act, and act now, to prevent a national health crisis.”
All of this will cause enormous economic damage after historic losses in the spring. Europe’s nascent recovery will go into reverse, and growth in the fourth quarter could be negative. The impact will ripple throughout the global economy, which accounts for the rout in equities. Investors have been betting on recovery, and at worst targeted lockdowns amid the inevitable fall and winter Covid spikes.