US stocks have fallen with the Dow Jones, S&P 500, and Nasdaq all lower after dire economic data and earnings highlighted the impact of the coronavirus shutdown and subdued investors.
The Dow Jones index dropped 1.3 per cent in early trading. The S&P 500 fell 0.7 per cent and the Nasdaq slipped 0.1 per cent.
Stocks fell after data showed 3.8m Americans made new jobless claims last week, taking the total number of claims over the last six weeks to around 30m.
European markets tumbled after data showed that Eurozone GDP fell 3.8 per cent in the first quarter and European Central Bank boss Christine Lagarde said the economy could shrink by 12 per cent this year.
The pan-European Stoxx 600 was down 1.5 per cent in afternoon trading. Germany’s Dax index was down 1.6 per cent and the Franch Cac 40 was 1.7 per cent lower.
Eurozone bank stocks fell after the ECB held rates and said it would not change its bond-buying programme for now.
In the UK, the FTSE 100 had tumbled 2.8 per cent by mid-afternoon. The blue-chip index was dragged down by oil giant Shell, which slumped 12 per cent after cutting its dividend. Lloyds Bank slumped eight per cent after reporting a plunge in profit.
“The big earnings we’ve seen this week have pretty much been in line with rock bottom expectations,” said Craig Erlam, senior market analyst at currency firm Oanda.
US stock market rally loses steam
In the US, yesterday’s rally on the back of hopes about a coronavirus drug from Gilead petered out amid pessimism about the economy.
The latest surge in jobless claims, previously unthinkable before the coronavirus crisis, adds to signs that the US economy’s recovery could be slow.
It came a day after data showed that US GDP shrank at the fastest pace since the financial crisis in the first quarter, with a 4.8 per cent drop.
Wall Street has rallied in recent weeks, supported by unprecedented stimulus from the US government and Federal Reserve.
Despite the economy entering its deepest contraction since at least World War II, the S&P 500 is only around five per cent lower than where it started this year.
Nigel Green, founder and chief executive of deVere Group, said that despite today’s fall, “fear of missing out” or “fomo” is likely to sustain the rally in the coming weeks, in his opinion.
In the oil markets, prices rebounded strongly. WTI crude, the US benchmark, was up 18 per cent to $17.70 per barrel. Brent crude was 14 per cent higher at $25.60.
The yield on the US 10-year Treasury bond fell three basis points (0.03 percentage points) to 0.598 per cent. Yields move inversely to price.