Europe’s stock markets were mostly firmer yesterday as investors focused more on easing lockdowns than fears of another coronavirus wave, while Frankfurt shrugged off data showing that Germany has entered recession.
In foreign exchange markets, the pound weakened against the euro as UK and EU negotiators reported little progress in post-Brexit trade talks.
Decoupling from a more pessimistic mood across the Atlantic, equity investors in Europe went fishing for bargains a day after stocks tanked on news of spiking jobless claims in the United States.
“After two down days for the markets, the week is ending on a more positive note for equities,” said AJ Bell investment director Russ Mould.
On Wall Street however, the Dow Jones index came off to a weaker start after Thursday’s late rally, with the US trend pushing European markets off their morning highs.
“Wall Street is closing out the week on a terrible note as trade concerns grow, and horrid data encouraged investors to head for the sidelines,” said Edward Moya at OANDA.
The coronavirus pandemic has tipped Germany into a recession, official data showed yesterday, with Europe’s top economy suffering its steepest quarterly contraction in more than a decade as lockdown measures began to bite.
The German economy shrank by 2.2% in the first quarter of 2020, federal statistics agency Destatis said, calling the quarter-on-quarter decline “the worst since the global financial crisis” in 2009.
The agency also revised its gross domestic product (GDP) figure for the final quarter of 2019 from zero growth to a contraction of 0.1%.
That means Germany has experienced two consecutive quarters of decline, meeting the technical definition of a recession.
But despite the GDP drop, the German economy appears to be weathering the coronavirus fallout better in economic terms than other eurozone members, analysts said, allowing room for some optimism.
The downturn “was significantly smaller than the average for the eurozone and less than half the impact seen in the countries that saw the harshest lockdowns such as France and Spain”, Oxford Economics said in a note.
Most European attention was meanwhile set on restarting economies, said analysts at Charles Schwab, “with the markets continuing to eye reopening progress in Asia, with China posting stronger-than-expected industrial production in April, along with the continued commencement of reopenings in key regions of Europe and phased restarts in the US”.
Asian bourses earlier diverged on mixed Chinese data that showed retail sales contracted in April — indicating crucial consumer activity remains weak — offsetting figures showing the first growth in industrial production this year.
Oil prices rose on demand optimism as people slowly emerge from lockdowns, while producers push ahead with massive output cuts.
In London, the FTSE 100 closed up 1.0% to 5,800.33 points; Frankfurt — DAX 30 ended up 1.2% to 10,465.17 points and Paris — CAC 40 closed up 0.1% to 4,277.63 points yesterday.
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