European Stocks Sink Fast as Wall Street Falters

/ 01:16 AM February 10, 2019

Losses in eurozone stock markets accelerated Thursday as a pessimistic economic growth outlook dampened sentiment and US markets followed suit, sticking firmly in the red.

“Yet more bad news reinforces the impression that the eurozone is headed steadily into recession territory,” noted IG analyst Chris Beauchamp. The EU Commission, the bloc’s executive arm, said it now expects growth of 1.3 percent in the eurozone this year, a significant cut from the 1.9 percent it predicted only last November. It said Europe is facing international headwinds — including Brexit fears, Italian economic woes and the global trade war — which have now taken the steam out of a post-crisis recovery in the eurozone. “That eurozone growth downgrade (is) not helping matters, but after their recent surge markets seem quite vulnerable to an outbreak of bad news,” Beauchamp told AFP. Frankfurt’s DAX 30 index closed 2.67 percent lower following the announcement, while the Paris CAC 40 index fell 1.84 percent. Stocks in German payments processing group Wirecard was among those suffering steep losses, with shares diving more than 15 percent after fresh reports its senior executives knew of alleged accounting fraud at the firm.

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London stocks, although also lower, outperformed their peers after the Bank of England left interest rates unchanged and warned of Brexit uncertainties. The pound wobbled during the central bank’s update, but quickly recovered. “The event got off to quite a shaky start as the central bank released its latest forecasts showing GDP growth this year suffered its biggest downward revision since August 2016,” said Craig Erlam, senior market analyst at Oanda. Britain and the EU, meanwhile, agreed to hold more talks to try to avoid a no-deal Brexit, after a “robust” meeting between Prime Minister Theresa May and European Commission chief Jean-Claude Juncker. After the talks, May vowed she would reach a deal “on time” for the scheduled March 29 Brexit deadline, but EU President Donald Tusk warned there was “no breakthrough in sight”.

Wall Street was headed for a second day in the red with all three main US indices more than a percent down. “Economic concerns across the pond appear to be hamstringing sentiment, courtesy of another dose of disappointing German data and as the Bank of England cut its economic outlook after leaving its monetary policy stance on hold due to the ‘fog of Brexit’,” analysts at the Charles Schwab brokerage said. Investors were also absorbing continued quarterly earnings reports and the news of a planned $66 billion bank merger between BB&T and SunTrust, creating the sixth-largest US bank. Twitter shares fell sharply after the company reported higher profits but a shrinking global user base. US stocks have risen steadily this year, recovering from December’s rout as investors expressed relief at signs the Federal Reserve is likely to pause its interest rate increases while Beijing and Washington work toward resolving their trade war. But analyst Patrick O’Hare wrote at Briefing.com that in the interim “the view has gotten a little cloudier, with valuation concerns re-entering the trading mix”.

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