(Reuters) – European stock markets headed lower on Friday, erasing meagre gains for the week, as more companies flagged a hit to business from the coronavirus pandemic, foreshadowing a deeper earnings recession ahead of the reporting season.
The pan-European STOXX 600 index <.STOXX> fell 0.5%, with insurers <.SXIP> tumbling 3% after a European Union regulator asked them to suspend dividends and share buybacks to shore up liquidity, as a halt in business activity crushes consumer demand and sparks mass layoffs.
“We are entering a climate with lower or no dividends, fewer financial options, but most importantly, fewer jobs and lower output,” said Stephen Innes, a strategist at AxiCorp.
“Many small- and large-sized businesses will not survive this storm.”
H&M <HMb.ST>, the world’s second-biggest clothing retailer, reported a 46% plunge in March sales and said it expected a loss in its fiscal second quarter.
However, the company’s shares, which have lost 40% of their value since end January, jumped 7% as it said was taking steps to strengthen its liquidity buffer and cut operating expenses.
With more than 1 million people now infected around the world and countries extending national lockdowns, economists expect euro area real GDP to shrink as much as 43% in the second quarter.
Macroeconomic figures are starting to reflect the extent of the economic damage from the health crisis, with U.S. jobless claims blowing past a record 6 million last week. In Spain, about 900,000 workers have lost their jobs since mid March.
“Global recession fears are now being confirmed by the incoming economic prints,” said Han Tan, market analyst at FXTM.
“Until the virus case count peaks and the business earnings outlook improves, risk sentiment may only experience fleeting bouts of positivity.”
The STOXX 600 index is still down about 28% — or $3.5 trillion in market value — from its mid-February record highs despite a rebound last week that was powered by aggressive monetary and fiscal stimulus from around the world.
Travel & leisure stocks <.SXTP> lost about 0.1%, as the industry braced for a long road to recovery with fresh data showing international seat capacity dropping by almost 80% from a year ago and half the world’s airplanes in storage.
Energy stocks tracked a slide in oil prices as investors grew doubtful about a Saudi-Russia deal that U.S. President Donald Trump said he had brokered. [O/R]
Britain’s BAE Systems <BAES.L> fell 2% after saying it would defer a decision on whether to pay its dividend and launching cost control measures following significant disruption from the virus outbreak.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Shounak Dasgupta)