“It is a big shock to markets that China, which appears to have successfully quashed the disease, is seeing a second wave. And in the US we see record cases in many states,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“All this suggests that the more you re-start the economy, the more infections you have. People have thought the economy will quickly recover in July-September after dismal April-June. But that is now becoming uncertain.”

Investors rushed to the safety of bonds, with the 10-year US Treasuries yield US10YT=RR falling 3 basis points to 0.704 percent.

In the currency market, the safe-haven yen rose about 0.3 percent to 106.72 per dollar JPY= while the US dollar also firmed against risk-sensitive currencies.

The euro dipped 0.1 percent to $1.1235 EUR= while the Australian dollar AUD=D4 lost 0.4% to $0.6852, also hit by worse than expected employment data.

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5.55am update: US weekly jobless claims remain high, second wave of layoffs blamed

A second wave of layoffs amid weak demand and fractured supply chains is likely keeping new US applications for unemployment benefits elevated, supporting views that the economy faces a long and difficult recovery from the COVID-19 recession.

The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, is expected to sketch a picture of continued labor market distress even though employers hired a record 2.5 million workers in May as businesses reopened after shuttering in mid-March to slow the spread of COVID-19.

Millions are still collecting unemployment checks. Federal Reserve Chair Jerome Powell told lawmakers this week that “significant uncertainty remains about the timing and strength of the recovery.” The economy fell into recession in February.

Initial claims for state unemployment benefits likely totaled a seasonally adjusted 1.3 million for the week ended June 13, down from 1.542 million in the prior week, according to a Reuters survey of economists.

The 11th straight weekly drop would push claims further away from a record 6.867 million in late March. Still, claims would be roughly double their peak during the 2007-09 Great Recession.

“People will say claims are coming down, but for an economy that is reopening, that is a huge number,” said Steven Blitz, chief U.S. economist at TS Lombard in New York.