Europe Markets

European stocks post first monthly drop since March amid fears of a second coronavirus wave

Key Points
  • The pan-European Stoxx 600 closed down by nearly 0.9%, registering its first month-to-date drop in four months.
  • The euro zone economy contracted by 12.1% in the second quarter of 2020, compared to the first three months of the year, according to preliminary data from the region's statistics office.
  • Friday's reading is the lowest since records began in 1995.

European equities closed out the month in negative territory on Friday, as investors digested corporate earnings and economic data.

The pan-European Stoxx 600 closed down by nearly 0.9%, registering its first month-to-date drop in four months. Airlines and travel-related stocks were some of the worst impacted components of the blue-chip index, with easyJet falling 22% and British Airlines parent IAG down 20% in July.

Both companies suffered their worst month since March. It comes amid investor fears over a recent jump in Covid-19 infections across Europe and the subsequent implications for travel.

The euro zone economy contracted by 12.1% in the second quarter of 2020, compared to the first three months of the year, according to preliminary data from the region's statistics office. Friday's reading is the lowest since records began in 1995.

In France, the statistics office said GDP fell by 13.8% in the second quarter of the year, slightly better than estimates, but still the worst on record. On Thursday, the German statistics office announced the German economy contracted by 10.1% in the second quarter — the worst reading since records began in 1970. 

Earnings

BNP Paribas reported a net income drop of about 7% for the second quarter in comparison with the same period a year ago. However, the French bank experienced higher trading volumes and beat market expectations. The stock closed almost 1% lower, paring back gains earlier in the session. 

Nokia led the gains across Europe, up by almost 13%, after beating profit expectations in the second quarter. The CEO said that the firm is seeing concrete midterm opportunities on the back of geopolitical trends.

UBI Banca saw the biggest jump among the banking stocks, up by more than 4%. The reaction follows news that Intesa Sanpaolo has secured 90.2% of its target shares in a bid for the former.