The pan-European Stoxx 600 slid 1.3% by early afternoon trade. Banks dropped 3.4% to lead losses while health care was the only sector in positive territory, adding 0.7%
European markets are following their Asian counterparts in mixed trade Tuesday, despite an overnight rally stateside that saw the S&P 500 erasing its losses and entering positive territory for the year.
Market optimists pointed to improving economic signals for the most recent rallies, including the U.S. government’s far-better-than-expected jobs report last week. The Labor Department said Friday the economy added 2.5 million jobs in May, a record. Economists polled by Dow Jones had forecast a drop of more than 8 million.
Still, despite the positive momentum seen in markets that are hoping for a faster-than-expected economic recovery from the coronavirus pandemic, the World Bank said Monday that it expects the global economy to shrink by 5.2%, representing the deepest recession since the World War II.
Euro zone GDP (gross domestic product) contracted by 3.1% year-on-year in the first quarter, European statistics agency Eurostat confirmed Tuesday, revising up its earlier prediction of a 3.2% contraction. On a quarterly basis, the bloc’s economy shrank by 3.6%, as coronavirus-induced lockdowns brought about the sharpest fall in growth since records began in 1995.
Attention on Tuesday is also on the U.S. Federal Reserve, which begins a two-day policy meeting. Investors will be waiting for the Fed’s statement on interest rates Wednesday, followed by a press conference led by Chairman Jerome Powell. The Fed is expected to reiterate its commitment to unlimited asset purchases.
In terms of individual share price action, British offshore energy firm Subsea 7 slid 7.3% to the bottom of the Stoxx 600, while software provider Aveva Group climbed 3.8% after the company announced cost-cutting plans.
