Markets

European stocks close lower on record U.S. GDP plunge; earnings in focus

Key Points
  • Earnings were in focus Thursday, with Credit Suisse, Volkswagen and Renault among the corporate giants reporting before the bell.
  • The U.S. economy posted its worst contraction in history during the second quarter, with GDP from April to June plunging 32.9%.

European markets closed sharply lower Thursday after investors digested a record drop in U.S. gross domestic product and a slew of major corporate earnings.

The pan-European Stoxx 600 closed down by over 2% provisionally, with banks shedding more than 4% as most sectors and all major bourses traded in negative territory.

Following its two-day monetary policy meeting, the U.S. Federal Reserve left interest rates unchanged and vowed to maintain its bond purchases and the array of lending and liquidity programs aimed at shoring up the economy amid the coronavirus fallout. The central bank warned that although activity had picked up from its trough, the U.S. economy is still well below pre-pandemic levels and would be heavily dependent on the course of the virus.

Further compounding the market's worries were troubling U.S. data. The U.S. economy posted its worst contraction in history during the second quarter, with GDP from April to June plunging 32.9%. Meanwhile, U.S. weekly jobless claims came in at 1.434 million, roughly in line with estimates. However, continuing claims, or those who have been collecting for at least two weeks, totaled 17.018 million, up from about 16 million last week.

On Wall Street, stocks fell with the Dow Jones Industrial Average off by more than 300 points and the S&P 500 and Nasdaq indexes also in the red.

Some market focus also remains attuned to the state of the pandemic, with Brazil reporting a daily record 69,000 new cases on Wednesday, while deaths from the virus in the U.S. have risen for three consecutive weeks and fresh spikes have been seen parts of China, Australia and mainland Spain.

Earnings in focus

Corporate earnings were high on investors' agenda Thursday. Credit Suisse reported a 24% increase in net income before the opening bell and made additional provisions amid a "challenging economic environment," along with announcing several structural changes. The Swiss lender's shares slipped nearly 2%.

Volkswagen cut its dividend after reporting a first-half operating loss of 800 million euros ($940 million) amid a 27% plunge in vehicle deliveries due to the coronavirus pandemic, while French rival Renault slumped to a 7.3 billion euro net loss in the first half of the year. Volkswagen shares tumbled 6% while Renault dived over 9%.

French lottery operator FDJ jumped almost 19% after positive first-half results, while at the bottom of the European blue chip index, U.K. auto retailer Inchcape fell 12%.

British domestic bank Lloyds fell almost 8% after slipping to a pretax loss on the back of a sharp increase in credit loss provisions due to the pandemic, while Spain's BBVA slid 8% after reporting a 50% fall in net profit.