Posted on Oct 29, 2020 at 10:04 amUpdated Oct 29, 2020, 10:22 a.m.
The calm after the storm. The main European stock markets rose shortly after the opening following the significant losses suffered the day before. Investors digest the new containment measures announced by France and Germany in the face of the second wave of the epidemic, which raise fears of a new brake on economic activity.
The CAC 40 took 0.45%, while the Dax in Frankfurt rose 0.61% and the Footsie in London 0.10%. As an encouraging sign, Asian stock markets limited their losses at the close after opening sharply lower overnight. Tokyo’s Nikkei index lost 0.37% and the Hong Kong Stock Exchange closed 0.63% lower.
Weight of the new restrictions
On Wednesday, the CAC 40 lost 3.37% to finish at 4,571.12 points, the Footsie gave up 2.55% and the Dax 4.17%. The Stoxx 600 fell to its lowest level since May, posting its worst performance in more than five weeks with a drop of 2.95%. The New York Stock Exchange closed sharply on Wednesday. Besides the pandemic, Washington’s failure to strike a deal on an economic stimulus package has caused all major indexes to fall more than 3%. The Dow Jones fell 3.43%, the S&P 500 3.53% and the technology index, the Nasdaq, was down 3.73%.
Emmanuel Macron and Angela Merkel announced Wednesday evening what the markets feared, a tightening of restriction measures in France and Germany to curb the alarming spread of the coronavirus. “The fears at work in the markets are far from what we saw in February and March, but the general mood is much worse than in the spring,” said David Madden, analyst for CMC Markets UK at AFP.
After the economic cataclysm of the first half, the scale of the year-end air hole is the number one fear for investors, at a time when the French stimulus plan for the first wave has not even entered into force yet .
In this context, the economic consequences of the measures linked to the pandemic could be felt heavily in the fourth quarter, increasing the pressure on the European Central Bank (ECB) in favor of further support measures. Christine Lagarde, the President of the ECB, will hold a press conference this afternoon following the central bank’s monetary policy meeting.
The session will also be marked by another major meeting, the publication of the first estimate of the gross domestic product (GDP) of the United States for the third quarter. Economists expect a very strong rebound in the US economy after the sharp contraction of 31.4% in the previous three months.