Home Business European stocks tread water as investors wait to hear from Fed’s Powell

European stocks tread water as investors wait to hear from Fed’s Powell

Europe Markets

Gloomy outlook from OECD darkens mood for stocks

A shopper wearing personal protective equipment, including a face mask as a precautionary measure against COVID-19, exits a reopened Zara shop in Grafton Street in Dublin, Ireland on June 8, 2020.

AFP via Getty Images

European stocks gave up early gains on Wednesday and were headed for a third-straight decline, as investors looked ahead to comments by Federal Reserve Chairman Jerome Powell and the central bank’s economic forecasts due later in the day.

The Stoxx Europe 600 index

slipped 0.1% to 369.31, after rising 0.6% at the start, after Tuesday’s drop of 1.22%, which marked the biggest one-day percentage fall since May 29. The German DAX

reversed to fall 0.3%, on the heels of a 1.6% drop, while the French CAC 40

was flat and the FTSE 100 index

fell 0.2%.

The euro

inched up 0.1% to $1.1356.

U.S. stock futures turned mixed, after Tuesday’s 300-point loss for the Dow industrials

and a loss for the S&P 500
though the Nasdaq

logged another record close.

Some steam came out of the equities rally after the Organization for Economic Cooperation and Development warned the world economy is “on a tightrope.” The body predicted a 6% fall in gross domestic product this year, provided a second wave of the virus can be avoided. If the virus returns, before the end of this year, global GDP will fall 7.6%, the body predicted.

More gloom on the global economy may only deepen the debate among investors as to whether equities have risen too far, too fast since the March lows brought on by the pandemic.

“The perception remains that stocks appear to be a one-way bet, given the support being proffered by central banks, as well as various fiscal measures, with all eyes on the conclusion of today’s Federal Reserve rate meeting,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.

A Fed statement is expected at 2 p.m. Eastern Time (8 p.m. CET), followed by a press conference led by Powell. The central bank, which has thrown unprecedented financial support at markets, isn’t expected to reveal new support or change its dovish stance, but will unveil economic forecasts.

The European Central Bank, meanwhile, has set up a task force to look at the idea of a bad bank to warehouse unpaid euro debt to shield commercial banks from any second fallout from the crisis, Reuters reported.

On the data front, French industrial production plunged in April, while China’s factory-gate prices fell deeper into deflation in May.

Within company news, Inditex

was in the spotlight after the Spain-based owner of Zara and other retail chains said it swung to a first-quarter loss, with a sharp fall in sales due to the pandemic. But it also said trends were improving in May as many economies began to reopen, and announced plans to close 1,200 stores to help integrate its bricks-and-mortar and online businesses. Shares rose 1%.


shares rose 3.2% after the French government on Tuesday revealed a €15 billion ($17 billion) rescue plan for the aerospace industry that includes €7 billion for Air France, which had previously been announced. Shares of Air France

fell 2.7%.

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