World stock markets mostly sank on Wednesday, hit by fears of a second coronavirus wave and news of a tanking UK economy, dealers said.
In midday trade, London’s benchmark FTSE 100 index shed 0.9 percent as official data showed the British economy contracted by 2.0 percent in the first quarter on the back of the COVID-19 outbreak.
That was the worst quarterly slump since the depths of the global financial crisis in 2008.
Yet the UK pound edged ahead against the dollar and euro, with analysts highlighting that the figure was comfortably better than expectations of a 2.5-percent contraction.
In the eurozone, Frankfurt and Paris lost about 1.5 percent in value, while Madrid and Milan retreated 0.9 percent and 1.2 percent respectively on concerns of a second wave of virus infections.
‘Negative’ investor mood
“The UK’s GDP crashed, and this is the reason that the FTSE 100 index is trading lower today,” said AvaTrade analyst Naeem Aslam.
“Overall, the mood in the European equity markets is negative. Traders are picking the momentum from Wall Street where most of the major indices closed (Tuesday) in negative territory.”
Asian equities meanwhile fell again after US President Donald Trump’s top coronavirus adviser warned that easing lockdown measures too early could spark another dangerous wave of infections and batter any economic recovery.
The second day of selling followed losses on Wall Street and eats into recent gains driven by slowing infection and death rates, and the lifting of economy-strangling measures that kept billions at home.
“Most of the sell-off over in the US was mainly due to investors being spooked by the re-opening of the economy,” added Aslam.
“US top infectious disease experts warned that opening the economy prematurely could spike up the infection rate – but (President) Donald Trump is determined to open the economy at pretty much any cost.”
Sentiment was also dented after lawmakers in Washington proposed giving the president powers to impose fresh sanctions if Beijing does not give a “full accounting” for the coronavirus outbreak.
The recent optimism that has flowed through markets — helped by trillions of dollars in worldwide stimulus and central bank backstopping – has been given a jolt by data showing fresh outbreaks in South Korea, China and Germany.
US infectious disease expert Anthony Fauci added to the unease Tuesday when he said in congressional testimony that reopening businesses and communities too early risked damaging recent progress in containing the disease.
He said federal authorities had developed guidelines on how to safely reopen activities, with a sustained 14-day decrease in cases as a vital first step.
Federal Reserve downbeat
Federal Reserve officials, however, have warned about the long-term financial impact of an extended shutdown.
St Louis Fed president James Bullard said that in an extended period of strict measures “you will get business failures on a grand scale and you will be taking risks that you would go into depression”.
His Minneapolis counterpart Neel Kashkari said the economy was likely only to see a “gradual, muted recovery”.
Key figures around 1100 GMT
- London – FTSE 100: DOWN 0.9 percent at 5 939.72 points
- Frankfurt – DAX 30: DOWN 1.5 percent at 10 657.15
- Paris – CAC 40: DOWN 1.7 percent at 4 396.44
- Madrid – IBEX 35: DOWN 0.9 percent at 6 702.90
- Milan – FTSE MIB: DOWN 1.2 percent at 17 353.54
- EURO STOXX 50: DOWN 1.4 percent at 2 843.99
- Tokyo – Nikkei 225: DOWN 0.5 percent at 20 267.05 (close)
- Hong Kong – Hang Seng: DOWN 0.3 percent at 24 180.30 (close)
- Shanghai – Composite: UP 0.2 percent at 2 898.05 (close)
- New York – Dow: DOWN 1.9 percent at 23 764.78 (Tuesday close)
- Brent North Sea crude: UP 1.0 percent at $29.67 per barrel
- West Texas Intermediate: UP 0.5 percent at $25.67 per barrel
- Euro/dollar: DOWN at $1.0839 from $1.0848 at 2100 GMT
- Dollar/yen: DOWN at 107.01 yen from 107.14
- Pound/dollar: UP at $1.2275 from $1.2260
- Euro/pound: DOWN at 88.30 pence from 88.49 pence