European stock market futures stabilized on Thursday after trading in the red over the last two days amid worries that increasing coronavirus cases could dampen the already bleak economic outlook. The second-quarter earnings have also been negatively impacting investor’s sentiments. This is because the majority of companies are set to report big losses for the June quarter due to lockdowns.
The trade tensions between the United States and China are adding to investors’ concerns. The yesterday selloff was helped by a huge drop in banks shares.
Shares of HSBC plunged more than 3.5% as Bloomberg reported that the US President may try to punish Hong Kong banks by undermining the Hong Kong dollar peg. They have also criticized HSBC for supporting Beijing’s national security law in Hong Kong.
Jasper Lawler, head of research at London Capital Group, said, “Should the peg disappear it could further destabilize Hong Kong and increase currency impacts on earnings.”
The Stoxx Europe 600 index fell 0.3% on Wednesday while the German DAX dropped 0.2%, and the French CAC 40 index slipped 0.4%.
The investor’s concerns over economic activities increased sharply after the European Commission forecast shows an economic contraction of over 8% for fiscal 2020. The commission said the European Union is in recession. However, they forecast more than 6% growth for fiscal 2021. The commission has also suggested all member countries take collective steps to combat pandemic related impacts on the economy.
On the other hand, the U.K. Chancellor of the Exchequer Rishi Sunak plans to introduce more stimulus measures to aid the economy. The U.K. seeks to provide 30bn pounds for the stimulus programs.
“While the announcements were innovative, they were unlikely to completely change the game for the UK’s economic outlook and would provide only a small respite for markets,” Economists and strategists at ING said.