Most equities fell Monday as a spike in new coronavirus infections across the planet forced governments to impose fresh containment measures, fuelling fears about the stuttering economic recovery.

Traders are also keeping tabs on Europe, where leaders are struggling to unite over an $860 billion rescue package for the battered European Union.

The rally that has characterised equity markets since hitting a March low is showing signs of stalling as the pandemic rages, with new infections from Australia to the United States.

The spikes — Hong Kong saw a record rise Sunday, while Florida’s has been described as “out of control” — have led leaders to unveil new measures to curb the disease’s spread, including closing bars and restaurants and making masks compulsory.

That has raised questions about the pace of the global economy’s recovery from an expected recession this year.

An index of US consumer sentiment last week showed it hit a three-month low in July.

“When coupled with the recent stickiness of jobless claims, the Michigan survey suggests some risk that the positive data surprises that dominated through June might have hit a brick wall,” said AxiCorp’s Stephen Innes.

Shane Oliver, of AMP Capital Investors, added: “Our base case remains for the economic recovery to continue, but for the deep V rebound evident in much recent data to give way to a slower, bumpier recovery going forward.

“Shares are still vulnerable to a further correction or consolidation, with renewed lockdowns and the US presidential election being the main risks.”

Investors are keeping an eye on Washington, hoping lawmakers will press ahead with fresh stimulus measures for the world’s top economy, with unemployment benefit bonus payments due to expire on July 31.

However, there are disagreements over how much to pay and Donald Trump is trying to include tax cuts. Failure to extend the scheme would have a catastrophic impact on poor families.

“Depending on how ugly or not the bipartisanship becomes, this story has the potential to move markets later in the week,” said Jeffrey Halley at OANDA.

“Discussions are taking on more urgency as COVID-19 continues its rampage across the Southern and Western United States. Enhanced shutdowns are now a genuine possibility as the US failed to emerge from even the first wave of the pandemic.”

EU stimulus deadlock

Shanghai jumped more than three percent, resuming a rally that saw the composite index jump around 15 percent in the first two weeks of July before a sharp drop last week.

Tokyo rose 0.1 percent after reversing early losses, while there were also gains in Mumbai and Manila.

But Hong Kong dropped 0.1 percent, and Sydney, Singapore and Jakarta slipped 0.5 percent. Wellington gave back 0.3 percent, while Taipei, Bangkok and Seoul were also in the red.

The corporate earnings season continues this week, with observers looking for companies’ commentaries, seeking clues about their outlooks.

“These are the folks who genuinely have their fingers on the economy’s pulse and can tell us with no uncertainty about underlying business trends and how those changes in consumer consumption patterns could ultimately drive stock market capital reallocations over time,” said Innes.

European leaders remain unable to break a deadlock on their planned stimulus programme, with a fraught summit going into a fourth day.

The talks have failed to yield agreement over the size and rules for the package of loans and grants to help drag Europe out of recession, with the Netherlands, Sweden, Austria, Denmark, and Finland wanting to pare it back and impose strict rules on how it is used.

Still, analysts expect a deal to eventually be hammered out.

“This is the pattern of negotiations and treaties in Europe, where European leaders really argue until the last minute before arriving to a consensus and a package,” Mathieu Savary, of BCA Research, told Bloomberg TV.

“We do not think that the absence of an agreement this weekend, at least so far until now, is the death knell of an agreement.”

The euro bounced back against the dollar after initially dropping at the start of trade, though shares in London, Frankfurt, and Paris all fell.