European shares on Friday closed in the red after EU lawmakers failed to agree on a coronavirus rescue package and British Prime Minister Boris Johnson announced that he had been infected.
The pan-European STOXX 600 on Friday started the day about 2 percent lower, then closed down 10.48 points, or 3.3 percent, at 310.90 after the announcement about Johnson’s test.
The declines followed a three-day rally. The index marked its best week since 2011, gaining 6.1 percent from a close of 293.04 on March 20.
London’s blue-chip FTSE 100 on Friday extended its losses after the news, closing down 304.48 points, or 5.3 percent, at 5,511.25, but still gaining 6.2 percent from 5,190.78 a week earlier.
With most of Europe practically under lockdown due to the COVID-19 pandemic, a recession appears imminent.
EU lawmakers on Thursday extended the deadline for agreeing on a comprehensive economic rescue package by two weeks over a dispute between the ailing south and the fiscally conservative north.
“Perhaps Boris testing positive contributed to the sell-off, though it would have happened anyway,” TS Lombard head of strategy Andrea Cicione said in London.
“The bottom line is that the recovery from this crisis will be a lot slower than consensus expects, and it will be further slowed down by the high level of unemployment and lack of capex,” Cicione added.
Stephen Innes, chief market strategist at financial services firm AxiCorp Financial Services Pty Ltd, wrote in a note: “There was no specific new coordinated action to ramp up the fiscal response to the crisis and, in particular, no agreement around ‘corona bonds.’”
A swathe of bumper stimulus measures worldwide had bought about a modicum of stability in equity markets, prompting the three-day rally.
However, with the outbreak showing no signs of slowing, risk assets are likely due for more pain. Cases in the US are now the highest in the world.
Oil and gas stocks, while dropping 4.6 percent on the day, outperformed their peers over the course of the week, surging about 19 percent as they continued to recover from a 24-year low.
European automakers were the worst performers on the day, shedding about 5.8 percent.
Travel and leisure stocks fell 5.8 percent, with cruise ship operator Carnival Corp slumping nearly 21 percent to the bottom of the index.
Banks dropped 5.4 percent as the European Banking Federation said that they should halt this year’s dividend payments to preserve capital and continue to lend until the effects of the coronavirus epidemic are clearer.
Additional reporting by staff writer
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