Europe Markets

European markets close lower despite hopes of economic recovery

Key Points
  • The pan-European Stoxx 600 provisionally closed down by more than 1%, with most sectors and major bourses in negative territory.
  • Banks and travel and leisure stocks led the losses, both off by more than 3%. 
  • On Wall Street, stocks were also mostly lower as investors took profits out of names benefiting from the economy reopening.

European stocks closed lower on Tuesday as investors weigh up the prospects of an economic recovery after the coronavirus pandemic.

The pan-European Stoxx 600 provisionally closed down by more than 1%, with most sectors and major bourses in negative territory.

Banks and travel and leisure stocks led the losses, both off by more than 3%. On Wall Street, stocks were also mostly lower as investors took profits out of names benefiting from the economy reopening.

Market optimists pointed to improving economic signals for the most recent rallies, including the U.S. government's far-better-than-expected jobs report last week. The Labor Department said Friday the economy added 2.5 million jobs in May, a record. Economists polled by Dow Jones had forecast a drop of more than 8 million.

Still, despite the positive momentum seen in markets that are hoping for a faster-than-expected economic recovery from the coronavirus pandemic, the World Bank said Monday that it expects the global economy to shrink by 5.2%, representing the deepest recession since the World War II.

Euro zone GDP (gross domestic product) contracted by 3.1% year-on-year in the first quarter, European statistics agency Eurostat confirmed Tuesday, revising up its earlier prediction of a 3.2% contraction. On a quarterly basis, the bloc's economy shrank by 3.6%, as coronavirus-induced lockdowns brought about the sharpest fall in growth since records began in 1995.

Attention on Tuesday is also on the U.S. Federal Reserve, which begins a two-day policy meeting. Investors will be waiting for the Fed's statement on interest rates Wednesday, followed by a press conference led by Chairman Jerome Powell. The Fed is expected to reiterate its commitment to unlimited asset purchases.

In terms of individual share price action, British energy services firm John Wood Group slid 9% to the bottom of the Stoxx 600, while at the other end of the European blue chip index, German meal kit company Hellofresh climbed almost 6%.