Major European stock markets closed the day lower on Thursday, as bleak PMI data, US-China tensions and a feared second wave of the coronavirus ending the recent rally.
It came after closely watched purchasing managers’ index (PMI) data for the eurozone on Thursday showed economic activity continuing to contract significantly for most firms, chipping away at investor sentiment.
The headline figure on the index came in at a dire 30.5, on a scale where figures below 50 show decline and above 50 show growth. But the results were better than the reading of 25 expected by economists in a Reuters poll.
The number of firms reporting declines in activity remained high but was lower than April, as some reopened with lockdowns easing. The May figure came in well above a record low 13.6 reading last month, the worst since the survey began 22 years ago.
The data brings “reassuring signs that the downturn likely bottomed out in April," said Chris Williamson, chief business economist at IHS Markit.
But Bert Colijn, a senior eurozone economist at ING, said: “The majority of businesses are still experiencing contraction or no change from a very low base. The data does suggest that unemployment is rising significantly across the Eurozone at the moment.”
The survey overall “buries any final hopes of a v-shaped recovery,” he added, with firms continuing to slash jobs at a rapid pace and the bounce-back slower than China’s when it began easing restriction in March.
Michael Hewson, chief markets analyst at CMC Markets, said it had largely been a “positive week so far” for markets until today’s decline. The pan-European Stoxx 600 (^STOXX) was at a three-week high on Wednesday, before losing ground on Thursday.
“For all of the underlying optimism that the worst is over in the short term, as we head into the heat of the European summer months, and the talk of holiday destinations re-opening from 1 July, there is some concern that a second wave is only a matter of time,” he said.
“The worry is second and tertiary waves are coming,” added Neil Wilson of Markets.com. “Whilst the likes of Italy, Spain and Britain get things under some degree of control, elsewhere it’s not looking so good.”
Stocks were trading lower in the US too as American unemployment insurance claims continued to mount and concerns heightened over tensions with China, but at a slower rate than in previous weeks. The S&P 500 (^GSPC) was trading 0.8% lower, the Dow (^DJI) was down 0.6% and the Nasdaq (^IXIC) was 1% lower.
Markets had closed lower overnight in Asia too, with grim regional economic data and US-China tensions weighing on stocks. Japan’s Nikkei (^N225) fell 0.2%, the Hang. Seng index in Hong Kong (^HSI) dropped 0.5% and China’s Shanghai Composite (000001.SS) closed 0.6% lower.