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Germany’s weak Business Confidence and Vaccine delay put pressure on European Stocks

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Globe Live Media, Monday, January 25, 2021

European stocks closed at two-week lows on Monday, as a drop in German business sentiment underscored the damage from tighter COVID-19 restrictions, as investors fear a slow launch of the vaccine may further delay economic recovery.

The pan-European STOXX 600 Index reversed initial gains and ended 0.8% lower. The German DAX lost 1.7%, the French CAC 40 fell 1.6% and the British FTSE 100 lost 0.8%.

 

The Ifo Economic Institute’s business climate measure fell to 90.1 in January from an upwardly revised reading of 92.2 in December, while a Reuters poll had forecast a reading of 91.8.

The German economy, the largest in Europe, will likely reach its pre-pandemic levels in mid-2022, according to a draft of a document prepared by the Ministry of Economy and accessed by Reuters.

 

“Germany’s first quarter GDP is likely to fall by at least 1% quarter-on-quarter, assuming restrictions for retail and services will only be gradually lifted after February 14,” Deutsche Bank chief economist wrote, Stefan Schneider, in a note.

 

Markets retreated after US drugmaker Merck said it will end development of its two COVID-19 vaccines.

British Airways-owned IAG, Ryanair, Lufthansa and Air France KLM fell between 3.3% and 7.7%, while retailers lost 1.5%.

 

Investors sought refuge in defensive sectors such as telecommunications and healthcare, which rose 0.9% and 0.7%, respectively.

Ben Oakley
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