LONDON: European and US stock markets sank Wednesday as investors worried over rising coronavirus infections in several countries and fresh trade tensions between the European Union and the United States, dealers said.

Meanwhile, updated IMF economic forecasts also hit at sentiment as the institution sees the global economy contracting by 4.9 percent this year due to the shutdown of transport and production meant to halt the transmission of the virus.

It sees the United States, the world's top economy, facing an 8-percent drop in GDP this year and the euro area's GDP plunging 10.2 percent.

China, which had been the source of much of the growth in the global economy this year, will eke out just 1 percent growth this year, the IMF believes.

Meanwhile, the US said it is considering new taxes on $3.1 billion in European imports amid a dispute over subsidies to planemaker Airbus, just days after the EU indicated it plans to move forward on a digital tax that would primarily hit US tech titans.

"It would appear that President Trump is picking a trade fight with Europe in an effort to distract US citizens from the domestic health situation," said analyst David Madden at CMC Markets UK.

- Concern over virus relapses -

But investors have not been distracted.

"Today we have the combination of rising coronavirus cases in various countries, including the US and Germany, which naturally casts doubt over the ability of countries to continue to reopen and people's willingness to ease their way back to something that resembles normal life," OANDA analyst Craig Erlam told AFP.

"Both of these are a considerable threat for businesses and employment. Add to that the trade aggression from the US towards Europe at the worst possible time... and investors are understandably unsettled."

Stock markets have rebounded strongly -- the Nasdaq composite struck a record high on Tuesday -- after having initially plummeted on the coronavirus lockdowns.

That is primarily due to the vast amounts of support governments and central banks have pumped into economies and markets.

But investors are nevertheless walking a tightrope between hopes the easing of restrictions will lead to an economic rebound and the possibility that the relaxation will inflame the pandemic again.

There are growing concerns of a relapse in some countries, with Tokyo governor Yuriko Koike warning a number of new cases had been found at one workplace.

That comes after Germany reimposed containment measures in two western districts -- home to almost 640,000 people -- after an outbreak at a slaughterhouse infected more than 1,500 workers.

Portugal has also announced new restrictions in and around Lisbon.

"Reopening optimism is showing signs of fading," noted City Index analyst Fiona Cincotta.

Meanwhile oil prices plunged more than five percent Wednesday after data showed that stocks of crude oil hit a record high in the US for the second straight week.

Oil prices had climbed in recent weeks on hopes of increased demand by consumers as economies reopen from coronavirus lockdowns and cuts by producers.

While stocks of petrol fell, renewed lockdowns would crimp demand recovery.

"The oil price has tumbled on health concerns, as demand might be hit," said CMC Markets' Madden.