London (AFP) – Worries about economic growth prospects hit global stock markets on Friday, 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 two percent 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.
– Brexit endgame –
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 dollars each, as a softer economy would likely lead to less demand for the fossil fuel.
– Key figures around 1640 GMT –
London – FTSE 100: DOWN 2.0 percent at 7,207.59 points (close)
Frankfurt – DAX 30: DOWN 1.6 percent at 11,364.17 (close)
Paris – CAC 40: DOWN 2.0 percent at 5,269.92 (close)
EURO STOXX 50: DOWN 1.8 percent at 3,305.73
New York – DOW: DOWN 1.6 percent at 25,557.55
Pound/dollar: UP at $1.3208 from $1.3107 at 2100 GMT on Thursday
Euro/pound: DOWN at 85.49 pence from 86.77 pence
Euro/dollar: DOWN at $1.1292 from $1.1374
Dollar/yen: DOWN at 109.86 yen from 110.82 yen
Tokyo – Nikkei 225: UP 0.1 percent at 21,627.34 (close)
Hong Kong – Hang Seng: UP 0.1 percent at 29,113.36 (close)
Shanghai – Composite: UP 0.1 percent at 3,104.15 (close)
Oil – Brent Crude: DOWN $1.54 at $66.32 per barrel
Oil – West Texas Intermediate: DOWN $1.56 at $58.42
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