European Markets’ Drop Accounted To Weak German Data and Surging Cases in the US


Markets in Europe closed lower on Tuesday over rising concerns about the extent of damage it underwent. Specifically, the damage the surging cases and new weak data from Germany’s industrial production pose to economic recovery.

Data from Stoxx 600 indicated a close down at 0.6%. Tech shares then lead other major sectors into negative territory with a 1.2% drop.

May data from the German industrial production came in on Tuesday. Overall, it was 3% less than the projected estimate, at 7.8%. According to a poll conducted by Reuters, earlier estimates by analysts projected a “10% economic contraction”. This would follow a heavy contraction in April at -17.5%. However, this accounted for only three weeks of Coronavirus lockdown measures in the country.

This new development, together with rising cases of new confirmed coronavirus infections in the US, led the European Commission to revise its 2020 economic contraction up to 8.3% with a 5.8% rebound in 2021. Previously, the commission estimated a 7.4% contraction in the region in 2020, followed by a 6.1% rebound in 2021.

Investor Focus Locked On Coronavirus Development

In the U.S., S&P 500 and Dow Jones Industrial Average indexes recorded a drop in equities while climbing tech stocks raised the Nasdaq Composite index.

New rising cases in various hotspots caused several governors to revise reopening measures to curb the spread of coronavirus. The greater Miami region also joined the list of these on Monday. This was while nationwide confirmed cases reach a whopping 2.93M with confirmed deaths at 130K. These figures are according to data by the Center for Disease Control and Prevention (CDC).

A recent development on the likelihood of the virus being airborne has led to the World Health Organization reviewing a request from a team of 239 scientists regarding the way forward. The scientists wrote an open letter to the WHO and relevant bodies. They wanted the organization to consider the possibility that the virus could be airborne.

“We are concerned that the lack of recognition of the risk of airborne transmission of covid-19 and the lack of clear recommendations on the control measure against the airborne virus will have significant consequences.” The letter stated.

The global economy seems to be currently reliant on investors. They are now making decisions based on the global development of coronavirus as reflected in the markets’ performance. As a result, many are now on the lookout for any progress on coronavirus treatments and vaccines.

Investors in the UK are anticipating the government’s announcement on Wednesday on its next chapter of economic recovery plans, pinning high hopes on more fiscal stimulus.

Top Gainers and Losers

British software company Micro Focus is looking at a bleak performance in the second half of 2020. This is because it dropped by approximately 20% in the first half of the year.

German pharmaceutical company Bayer dropped by 6% after a judge in the U.S. raised concerns over the high number of settlements against claims that its Weedkiller Roundup product causes cancer. In response, Bayer stated:

“We appreciate the judge’s order raising his preliminary concerns with the proposed class settlement, which we take seriously and will address at the preliminary approval hearing on July 24.”

Meanwhile, German bank Commerzbank shares rose by 4% after an upgrade by Morgan Stanley from underweight to overweight. This occurred a few days after Commerzbank’s CEO, and chairman almost decided to fold their cards amidst increasing pressure from shareholders to switch up their strategy.

Economic news from Asia recorded a positive outcome. This followed a week’s solid run in mainland China’s stock market, which boosted the performance of indexes across the region. The Shanghai Composite closed higher at 1.74%, Shenzhen[u1] Component at 1.841% and the Hang Seng index in Hong Kong rose by 0.42 in the eleventh hour.

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