Europe close: Stocks pare losses despite downbeat growth forecasts
By Alexander Bueso
Date: Tuesday 07 Jul 2020
(Sharecast News) - Stocks in Europe managed to pare their losses towards the end of trading despite the European Commission downgrading its growth forecasts and the still worrisome headlines around the coronavirus pandemic out of the US.
"The environment hasn't really changed and this is not a week of major economic releases or central bank announcements," said Craig Erlam, senior market analyst at Oanda.
"We are heading into second quarter earnings season though which will naturally be a disaster, albeit one that will more than likely get a free pass, as investors focus more on the reopening prospects."
On a related note, Jim Reid at Deutsche Bank noted how the previous session had seen one of the calmest trading days since February on the US S&P 500, while analysts at Rabobank broached the possibility of a 'summer lull' as some exhausted investors took their first days off of the year.
By the end of trading, the benchmark Stoxx 600 was down 0.61% at 368.96 and the German Dax by 0.92% to 12,616.80, while the FTSE Mibtel had drifted lower by 0.10% to 20,012.68.
Foremost on the economic side of things, in its summer forecast, the EC lowered its view for Eurozone GDP growth in 2020 from -7.7% to -8.7%.
"The forecast assumes that lockdown measures will continue to ease and there will not be a 'second wave' of infections," the Commission warned.
Underscoring the depth of the current crisis, while Capital Economics revised up its forecast for second quarter euro area gross domestic product, it did so from a quarterly annualised pace of -20.0% to -12.5%.
For all of 2020, Capital Economics was now expecting a contraction of -7%, versus -12% previously.
Elsewhere, ECB bank supervisor Kerstin af Jochnick said the monetary authority might extend its recommendation not pay dividends or conduct share buybacks from October until the end of 2020.
On the pandemic front, the news headlines continued to focus on rising Covid-19 caseloads in multiple US states, especially in Califrornia, Florida and Texas.
Analysts at Pantheon Macroeconomics however believed that the daily rate of new cases in the States would start falling from mid-to-late July.
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