European stock markets couldn’t hang on to early gains on Tuesday, opening marginally higher before quickly falling into the red.
However, by 2.30pm London time, the FTSE 100 was down 1.1%, the DAX was 0.2% lower, and the CAC 40 was down 0.7%.
“European shares were firmer at the open before losing steam quickly,” said Neil Wilson, chief analyst at Markets.com.
Eurozone stocks had initially been boosted by news on Monday (18 May) that France and Germany had proposed a €500bn (£446bn, $546bn) COVID-19 recovery fund. The fund would offer grants, not loans, to European regions and sectors hit hardest by the pandemic.
Traders were also cheered by one of the best days on Wall Street in 2020. The Dow gained 4% and the S&P 500 ended more than 3% higher on Monday. It came after biotech firm Moderna said it was seeing positive results from a trial of a possible COVID-19 vaccine.
Stocks rose overnight in Asia. Japan’s Nikkei (^N225) rose over 1%, South Korea’s KOSPI (^KOSPI) and the Hang Seng index in Hong Kong (^HSI) both climbed around 2%, and China’s Shanghai Composite (000001.SS) closed 0.8% higher.
However, optimism was tempered by new data underlining the scale of the damage done to economies by the coronavirus pandemic.
The latest data from the UK’s Office for National Statistics (ONS) revealed that unemployment claims surged by 69.1% in Britain swiftly after the coronavirus lockdown began. The number of claims for jobseekers’ allowance and universal credit spiked between March and April to reach 2.1 million.
Elsewhere, the European Automobile Manufacturers Association (ACEA) said new car registrations plunged by over 76% year-on-year in April.
The World Economic Forum (WEF) on Tuesday also published a new report examining the medium and long-term risks posed by the COVID-19 pandemic. The report, based on a survey of 350 “senior risk professionals”, found business leaders fear the legacy of the COVID-19 pandemic will be a “prolonged global recession” and mass unemployment.
Futures initially pointed to a positive open in the US later today but the S&P 500 and Dow Jones both eventually opened lower.
In London, airline stocks led the FTSE 100.
Transport minister Grant Shapps on Monday evening hinted that the UK may allow “air bridges” between the UK and countries with similar infection levels, doing away with the need for a 14-day quarantine for any visitors.
Laggards included the world's largest caterer, Compass Group (CPG.L), which fell over 4% after it launched a £2bn ($2.4bn) share offer to boost liquidity. Tobacco group Imperial Brands (IMB.L) tumbled over 6% as it announced plans to cut its dividend by a third and warned of a bigger hit from the COVID-19 crisis in the second half of 2020.
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