Europe’s economy to shrink by 8.7 %, says European Commission

The eurozone economy will contract by 8.7 percent in 2020 due to the coronavirus crisis, said the European Commission. “Stocks in London and on the continent are lower as the EU Commission issues a bleak outlook for GDP growth, pouring cold water on the economic recovery narrative that had held sway over the past few sessions thanks to data from the US and China,” said Chris Beauchamp, chief market analyst at IG trading group.

Sentiment in Europe and US was also undermined by a bout of late selling in Chinese markets, although Shanghai managed a slightly firmer close. European markets were up to 1.5 percent lower at the close, while on Wall Street the Dow Jones index was around 180 points lower by the late New York morning. “Investors are pausing for breath,” observed Fiona Cincotta, analyst at City Index.

The easing of lockdown measures and reopening of economies has been the key driver of a months-long surge across equities, but a new surge of infections in several countries gave investors pause. Melbourne, Australia’s second-biggest city, has locked down more than five million residents after virus cases there surged.

Fawad Razaqzada at ThinkMarkets said it was unclear whether Tuesday’s pullback was just a limited retracement “or something more significant”. For now, he said, “the path of least resistance remains to the upside despite today’s weakness”. In a rare incidence of upbeat business news, Samsung Electronics said Tuesday it expects to see operating profit jump by 23 percent in the second quarter, which is much better than the single-digit fall that analysts had forecast.