German GDP downgrade and coronavirus worries hammer European stocks
European stocks tumbled on Wednesday as extended coronavirus lockdowns drove the German government to slash its growth forecast for 2021, while talk of further interest rate cuts by the European Central Bank hit banking stocks.
After holding largely unchanged in morning trade, the pan-European STOXX 600 fell into the red and closed down 1.2% – its biggest single-day percentage fall in over five weeks.
The global mood also soured as investors turned more cautious about mounting coronavirus cases around the world and about stretched stock valuations after retail investors piled into some niche U.S. stocks, causing an eye-popping surge in their market value within just days.
The German DAX underperformed major regional indexes, falling 1.8%, after the growth forecast for Europe’s largest economy was cut to 3% for this year, a sharp revision from last autumn’s estimate of 4.4%.
Economy-linked stocks bore the brunt of Wednesday’s selloff, with miners, banks and automakers falling between 2% and 3.6%.
“It can be a bit bumpy, especially the first half of the year,” said Matthias Scheiber, global head of multi-asset solutions at Wells Fargo Asset Management in London.