European stock markets sank into negative territory shortly before the close on Thursday, unwinding strong gains seen earlier in the session.
The sell-off was driven by steep falls on Wall Street, where the tech-heavy Nasdaq (^IXIC) fell as much as 5%.
Major European stock markets had opened strongly on Thursday, buoyed by news of a €100bn economic stimulus plan in France and a Spanish pledge to support the economy through the country’s ongoing second wave of COVID-19 cases.
The CAC 40 (^FCHI) in Paris led the way, with gains of over 1.5% for much of the session. The French government announced a bumper investment plan aimed at helping the country’s economy bounce back from COVID-19. The €100bn stimulus package, dubbed “France Relaunch,” includes tax cuts, wage subsidies, and funding for environmental projects, according to Bloomberg.
Spain’s IBEX 35 (^IBEX) also rallied strongly. The country’s labour minister said Spain’s government furlough scheme would be extended for “as long as necessary” and the health minister ruled out the possibility of a second lockdown, the Guardian reported.
However, gains quickly turned to losses late in the session after stocks began to tank on Wall Street.
It came as tech stocks tanked on Wall Street, leading to a broad sell-off across major stock markets.
“To an extent todays sharp slump in tech stocks appears to be a case of shifting assets, with better-than-expected jobs data and rising expectations of a Trump election win boosting the case for investment in those stocks heavily hit throughout this crisis,” Josh Mahony, a senior market analyst at IG, wrote in an afternoon note.
“The markets take the stairs on the way up and the elevator on the way down, sometimes the window,” said Mati Greenspan, founder of Quantum Economics, quoting “an older trader proverb.”
Stocks were mixed in Asia overnight. Japan’s Nikkei (^N225) gained 0.9%, but elsewhere the Shanghai Composite (000001.SS) dropped 0.6%, the Shenzen Component (399001.SZ) fell 0.6%, and the Hong Kong Hang Seng (^HSI) lost 0.8%. Australia’s ASX 200 (^AXJO) gained 0.8%.
The fightback for the dollar continued, with the greenback making gains against both the euro and sterling. It follows an extended slide for the dollar over the last few months.
“The dollar has regained some ground over the past 24 hours,” AIB’s Fahey wrote in a note on Thursday morning. “This was despite a mixed bag of results from yesterday’s data.”