European stocks drop after Fed warns of slow coronavirus recovery
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European stocks drop after Fed warns of slow coronavirus recovery
European stock markets fell on Thursday, as hopes for a quick recovery from coronavirus faded after the head of the US central bank warned of long-term damage to the world’s biggest economy. London’s FTSE 100 dropped 2.3 per cent, while Frankfurt’s Xetra Dax fell 1.7 per cent and the region-wide Stoxx Europe 600 dipped 1.6 per cent.
The declines come a day after Jay Powell, chair of the US Federal Reserve, warned that a US “recovery may take some time to gather momentum”, adding the country risked an “extended period of low productivity growth and stagnant incomes”.
"What was notable from his remarks was how he dwelled for some time on the permanent effects that a recession of such a large magnitude can have," said Jim Reid, an analyst at Deutsche Bank.
Mr Powell’s comments come as optimism about the relaxation of lockdowns across Europe is tempered by fresh virus outbreaks in countries such as South Korea and China, which have already reopened their economies.
The downbeat prognosis from Mr Powell has damped investor optimism in Europe, despite the Italian government approving a €55bn fiscal stimulus package late on Wednesday. Milan’s FTSE MIB slipped 1.5 per cent.
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