European shares hit 3-week low on doubts over speedy recovery

Euro zone banks hover near all-time lows

 

A wave of selling hit European shares on Thursday amid investor fears of a prolonged economic downturn due to the coronavirus pandemic, driving euro zone banks to all-time lows at one point.

The pan-European Stoxx 600 closed down 2.2 per cent to hit its lowest level since April 22nd. After recovering sharply from mid-March lows with help from massive stimulus actions, the Stoxx 600 has shed about 4 per cent in May on worries that the early easing of lockdowns by certain countries will cause a second wave of infections.

Those fears were further heightened by the US Federal Reserve chair Jerome Powell warning of a recession worse than any since the second World War and the World Health Organisation saying that the coronavirus may never go away.

Retailers, food and beverage companies and industrials led sectoral declines in Europe.

DUBLIN

Dublin’s Iseq tracked down along with the rest of the Europe, closing 0.9 per cent down at 5,277. Aryzta endured another miserable session, falling 5 per cent to just 31 cent amid speculation over the Swiss-Irish food company’s future.

The company this week appointed investment bankers Rothschild to review the strategic and financial options available to it in a bid to restore shareholder value.

Along with its peers abroad, Irish food giant Kerry fell 3 per cent to €100.50 as food companies and industrials bore the brunt of the latest market turn.

Ryanair fell a further 2 per cent to €8.62 as the European Commission said airlines must give passengers refunds for cancelled flights, and that vouchers alone would no do. The two main banks, in contrast, tracked up. Bank of Ireland and AIB both closed 6 per cent up on the day.

LONDON

UK stocks closed firmly in the red on Thursday as investors worried that a recovery from a coronavirus-led economic slump would be slower than expected even as several hard-hit countries started easing lockdowns.

The blue-chip FTSE 100 was down 2.8 per cent, with battered energy and travel and leisure stocks down nearly 4 per cent. The mid-cap FTSE 250 shed 3 per cent.

Insurance stocks fell 3.7 per cent after Lloyd’s of London said it was likely to pay up to $4.3 billion in claims related to the Covid-19 pandemic, while underwriting and investment losses for the global non-life insurance sector could reach a record $203 billion.

On Wednesday, the UK posted its sharpest ever GDP contraction in March, with economists warning the slump could be worse in April. For the year, the Bank of England has predicted the worst recession in three centuries.

Data from the United States continued to show more distress in its labour market as Americans filing for unemployment benefits rose to 2.981 million for the week ended May 9th.

With the UK starting to ease some restrictions, housebuilder Persimmon said it had restarted 65 per cent of its construction work and was reopening sales offices on May 15th.

EUROPE

Trade-sensitive automakers dropped 2.8 per cent as Fiat Chrysler and Peugeot decided not to pay ordinary dividends for 2019. Euro zone banks closed down 0.7 per cent after hitting a record low earlier in the session. The index is down nearly 50 per cent this year as surging loan losses due to the pandemic and a dividend payment freeze hit stock prices.

“There’s a risk that the dividend will not be reinstated for the current year,” said Filippo Alloatti, senior credit analyst at Federated Hermes.

“This is an important element for the equity story of eurozone banks. The sector is de facto ex-growth.”

UK homebuilder Countryside Properties slumped 17.3 per cent to the bottom of the Stoxx 600 as the closure of its sites and sales offices battered half-year revenue and profit.

Portuguese retailer Jeronimo Martins tumbled 10.9 per cent after it withdrew its forecast for 2020 due to the uncertainty stemming from the pandemic.

In contrast, pan-European exchange operator Euronext gained 2.6 per cent after reporting a 55 per cent jump in quarterly revenue, partly driven by heavy trading in March that has propped up profits for some brokerages.

NEW YORK

Wall Street’s main indexes were lower in choppy trading on Thursday, as renewed worries about Sino-US trade relations added to fears of an extended economic downturn due to the virus outbreak.

US president Donald Trump said he was very disappointed with China over its failure to contain the novel coronavirus, saying the worldwide pandemic cast a pall over his US-China trade deal.

This further rattled markets after Federal Reserve Chairman Jerome Powell’s sombre outlook on the economy and US infectious disease expert Anthony Fauci’s warning that the virus was not yet under control.

The three main stock indexes were headed for a third straight day of losses. Market participants said a rally in bank stocks helped Wall Street indexes come off intra-day lows. Wells Fargo surged 6.1 per cent as it bounced back from 11-year lows.

Norwegian Cruise Line Holdings shed 1.6 per cent as it swung to a quarterly loss. Cisco Systems rose 5 per cent after beating quarterly revenue and profit estimates, as lockdowns globally boosted demand for its remote-work tools and networking equipment.

- Additional reporting by Reuters