Business restrictions knock European stock markets

European stock markets begin the new week with a bigger loss as shares plunged on fresh social distancing restrictions in the euro-zone. The wider than expected loss from German largest tech company SAP pulled out 7% of the value from the tech sector.
The pan-European STOXX 600 index and the German DAX extended the downside trend into Tuesday trading as concerns are high over the virus spread.

Virus concerns are looming on European stock markets

The European region has been reporting record growth in daily infections while the situation is even worse in the United States. Spain, Italy, and several other European countries have imposed new restrictions, which could cost hundreds of billions of losses to the eurozone economy in the final quarter of this year.
European stock markets are currently trading at a multi-month low. German DAX has hit three months low on Monday.
SAP, the largest European software company, said they are expecting a longer time for a full recovery and the company has abandoned short-term profitability outlook.
“SAP’s pessimism does not bode well for hopes for the global economic recovery to continue,” said Edward Moya, senior market analyst at OANDA, New York.
“If tech goes, the deteriorating outlook due to virus spread will likely yield massive risk aversion as investors head for the sidelines instead of rotating into cyclicals,” Edward Moya added.

Economic growth concerns are adding to downside

The European stock market has been under pressure over the past couple of weeks. The acceleration in selloff began this week because social distancing restriction has started impacting economic growth forecasts
For instance, a eurozone purchasing managers survey hinted that economic activity declined in the last week amid concerns over the second virus wave and expectations of a double-dip recession. The hardest-hit countries like Spain, Italy, and France are anticipating billions of dollars of losses due to fresh restrictions. The higher unemployment rate is also among the biggest risk for these countries.

Alex Livermore


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