NEW YORK: Stock markets plunged on Thursday after economic growth data confirmed fears of Covid-19’s bruising impact on the world economy.
Key eurozone finished down more than 2%, while London dropped even more sharply.
Wall Street also retreated after the Labor Department reported another spike in jobless claims, while oil prices surged for a second straight session.
The EU economy shrank 3.5% in the first quarter, the first major indication of the devastation facing the bloc as a result of coronavirus.
Separate figures revealed that the jobless total in Europe’s biggest economy Germany soared 13.2% in April.
The European Central Bank, also on Thursday, promised that it was ready to reload its weapons to help offset the economic impact of the coronavirus, notably by buying more bonds.
But the fact it hadn’t already done so left some analysts disappointed.
“The Bank’s failure to expand its asset purchase programs leaves some doubt about policymakers’ commitment to ensure that the huge economic shock which the region is experiencing does not morph into a new sovereign debt crisis,” said Capital Economics.
The euro rose against the dollar after ECB chief Christine Lagarde said the monetary policy council had not discussed widening its asset buying program to include junk bonds.
Across the Atlantic, Wall Street stocks fell after the Labor Department reported that another 3.8 million US workers filed for unemployment benefits last week, taking the six-week total above 30 million.
Best month in decades
But the S&P 500 still finished April with more than a 12% gain, its best monthly performance since 1987.
US stocks have been on a tear in recent weeks as the market focuses on improving trends in some coronavirus hotspots and unprecedented government stimulus rather than the mounting economic toll from the crisis.
The Federal Reserve on Thursday expanded its business loan program to reach more troubled firms, the latest forceful move that has emboldened equity investors.
“The Fed will keep funnelling capital into the financial system until the American economy is back on a solid footing,” analyst Nicholas Colas of DataTrek Research said in a note.
“Since no one knows how the US economic restart will actually go and if there will be setbacks, the Fed will err on the side of more stimulus rather than less for many, many more months.”
Earlier Thursday, however, Asian stocks advanced, following promising news Wednesday Gilead Science’s remdesivir drug “has a clear-cut, significant, positive effect in diminishing the time to recovery” from the coronavirus.
“While a treatment is not a vaccine, a successful treatment would be a game-changer for the virus and would help facilitate a greater rollback of containment measures,” said National Australia Bank’s Tapas Strickland.
“It could also give consumers greater confidence to resume pre-pandemic activity.”
On crude markets, both main contracts soared for a second day – with WTI’s gain adding to a 25% advance Wednesday.
Oil prices had been hammered last week by worries over almost non-existent demand and a lack of storage facilities, which offset a massive cut in output by major producers.