London, United Kingdom — Most European stock markets slid Wednesday as the economic damage from the coronavirus became apparent.
The euro dropped against the dollar and pound, while oil prices gained ahead of a crucial producers’ meeting on possible output cuts.
“European markets have slipped back today as investors got a flavor of the economic destruction being wrought across Europe by the virus,” said Michael Hewson, chief market analyst at CMC Markets UK.
The Bank of France, meanwhile, said the nation’s economy likely contracted six percent in the first quarter, putting it in recession and marking the worst performance since 1945.
The German economy, Europe’s biggest, is expected to shrink by nearly 10 percent in the second quarter as the coronavirus paralyses the country, leading research institutes warned Wednesday.
“It would appear that the size of the economic contraction, when extrapolated across the rest of 2020 has delivered a huge wake up call to markets as to the eventual price tag of this crisis,” said Madden.
Meanwhile, EU finance ministers failed to agree on a coronavirus bailout package for hard hit countries such as Italy and Spain.
And the World Trade Organization said global trade could fall by between 13 percent and 32 percent this year.
WTO chief Roberto Azevedo warned we are facing the “deepest economic recession or downturn of our lives.”
While the deadly disease continues to sweep across the planet, there have been signs that the rate of infections might be leveling out and countries are preparing to ease some lockdown restrictions.
This had instilled a semblance of optimism in markets this week, and appeared to be driving Wall Street higher, with the Dow up over 2 percent in late morning trade.
“Talk of another stimulus plan, along with comments from Anthony Fauci, the director of the US National Institute of Allergy and Infectious Diseases, that there could well be turnaround in reported cases after this week, has seen markets move higher,” said Hewson at CMC Markets UK.
In Asian trading, Tokyo jumped more than two percent, helped by a weaker yen and details of Japan’s huge stimulus package worth $1 trillion amid a month-long state of emergency for Tokyo and six other regions in the country following a spike in coronavirus cases.
The remaining markets in the region fell, following on losses overnight from New York.
Oil prices also climbed Wednesday, but the commodity continues to swing as traders keenly await Thursday’s planned meeting of the world’s top producers to discuss a possible output cut.
Crude oil has been seared by the virus as lockdowns around the world bring the global economy to a standstill and dampen demand, while a price war between Russia and Saudi Arabia has compounded the crisis.
With Riyadh and Moscow taking part in the meeting Thursday, there are hopes they might draw a line under their dispute.
Howie Lee, an economist at Oversea-Chinese Banking Corp. said that while a cut of 10 million barrels “would lend some support to prices”, US participation was key, otherwise other producers would not be likely to take part.
“The base case is still that a deal will get done or that talks will be extended, and that is pretty much only thing keeping oil prices supported,” said senior market analyst Edward Moya at online trading group OANDA.