European stock markets opened lower on Wednesday, amid fears about a steep global recession caused by the COVID-19 pandemic.
The FTSE 100 (^FTSE) was down 2.2% in London after almost two and a half hours of trading, while the DAX (^GDAXI) was down 2.1% in Frankfurt. The CAC 40 (^FCHI) in Paris was 1.9% lower and the Euronext 100 (^N100) was down 1.8%.
Stocks had initially opened only slightly lower but dropped as the trading session progressed. Analysts pointed to fears about the economic fallout from the coronavirus pandemic and efforts to contain it.
The International Monetary Fund (IMF) said on Tuesday the global pandemic is likely to cause the worst recession since the Great Depression of the 1930s and do lasting damage to the global economy.
“Markets have pulled back this morning as fears mount that we’re heading for a deep global recession following predictions by the International Monetary Fund (IMF),” said Adam Vettese, UK market analyst at eToro, said.
“As concerns over the gravity of the global downturn continue, it adds fuel to the debate of whether the recent uptick in stocks is merely a bear market rally as opposed to a full reversal.”
There are now 1.98 million confirmed cases of COVID-19, according to John Hopkins University, and just over 126,000 people globally have died from the disease. Growth rates for both new cases and fatalities over the last 24 hours were the lowest since the first week of March.
US stock futures were pointing to a lower open later today in New York. S&P 500 futures (ES=F) were down 1.9%, Dow Jones Industrial Average futures (YM=F) were down 1.7%, and Nasdaq futures (NQ=F) were off 1.4%.
“US markets, after a strongly positive session yesterday, look set to open lower later today as Citigroup and Bank of America become the latest US banks to outline their expectations for the US economy, as well as their latest first quarter trading update,” said Michael Hewson, chief market analyst at CMC Markets.
“Having seen the big provisions set aside by JPMorgan and Wells Fargo, we can expect more of the same from these two as well given their sizeable retail operations across the US.”
Overnight in the US, President Donald Trump announced he was withdrawing funding from the World Health Organisation (WHO), which has been coordinating and advising countries on the national response to COVID-19.
The President has recently been involved in a war of words with the WHO, a branch of the United Nations, over its handling of the pandemic. Trump said the WHO “pushed China’s misinformation about the virus” as he announced he was halting funding. The US is the largest funder of the WHO, contributing $893m over the past two years according to Deutsche Bank.