Worries about economic growth prospects hit global stock markets yesterday, causing sharp price drops on both sides of the Atlantic.
Already uneasy after a pessimistic outlook on global growth from the Fed this week, investors then rushed to sell when confronted on Friday with clear signs of weak European growth.
“A series of worse than expected economic releases from Europe have sounded the alarm bell not just for the bloc, but also the global economy, by providing further evidence of a worldwide slowdown in economic activity,” said XTB analyst David Cheetham.
In foreign exchange, sterling rose again after Brussels gave Britain a Brexit deadline extension.
But the euro tanked as did key European equity markets, falling by up to 2% by the close, while in the US, major indices also slumped.
“US stocks are down, as global growth concerns are taking a front seat on the heels of disappointing European economic data and a gloomy global outlook from the Fed earlier in the week,” said analysts at Charles Schwab.
Signs of a weak first quarter for the eurozone mounted on Friday as a closely-watched survey pointed to March output being dragged further down by manufacturing weakness, especially in Germany, Europe’s largest economy.
The German data were “shockingly bad”, said Angel Talavera, an economist with Oxford Economics, and “a timely reminder that the European industrial sector continues to be dominated by worries and potential negative shocks, including the outcome of the Brexit negotiations, trade concerns and problems in the auto industry”. This followed a cut in the Federal Reserve’s growth outlook and an unexpected pivot by the US central bank on monetary policy.
The pound however pushed higher one day after European Union leaders agreed at a crucial summit to delay Brexit following a request from Prime Minister Theresa May.
If the premier fails next week to push her divorce agreement through a fractious parliament that has already rejected the deal twice, Brexit will take place on April 12, unless London agrees to take part in European elections.
If she manages to get the deal passed, the exit date will be pushed back until May 22.
Prior to the offer, Britain had been due to crash out from the bloc next Friday.
“Sterling remains very volatile as EU leaders have moved to stop a chaotic no-deal Brexit from happening next week by handing Theresa May an extra fortnight,” said Oanda analyst Craig Popplewell.
The world’s main oil contracts lost about $1.50 each, as a softer economy would likely lead to less demand for the fossil fuel.
In London, the FTSE 100 closed down 2.0% to 7,207.59 points; Frankfurt — DAX 30 ended down 1.6% to 11,364.17 points and Paris — CAC 40 closed down 2.0% to 5,269.92 points yesterday.
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