By Sagarika Jaisinghani
(Reuters) – European stock markets fell on Friday with investors disappointed by the lack of details in a trillion-euro emergency fund agreed by the bloc’s leaders as evidence grew of the global damage wrought by the coronavirus crisis.
After weeks of squabbling, EU leaders approved an immediate rescue package of about 500 billion euros but left the divisive details of a bigger fund until the summer, sending the pan-European STOXX 600 index down 1.2% in early trading.
The slide put the benchmark index on course to end a two-week winning streak, adding to a selloff driven by a historic collapse in oil prices on Monday as sweeping lockdown measures to contain the virus outbreak shut production and crush demand.
London’s FTSE 100 <.FTSE> fell 1.5% with data showing UK retail sales crashed in March, a day after surveys signalled a collapse in April business activity across the globe and U.S. jobless claims topped 26 million in five weeks.
“Investors are basically giving the thumbs down sign to the short term plan that the European Commission leaders have drafted yesterday,” said Stefan Koopman, senior market economist at Rabobank.
“It’s not seen as enough – it’s just perceived as a stopgap measure and markets were hoping to hear something about the long term recovery plan, but details were clearly lacking.”
The STOXX 600 has recovered this month from eight-year lows hit in March, partly on hopes the strict stay-at-home orders would be eased on signs the pandemic was peaking in the worst hit parts of the world.
But the index remains 24% below its February record high, and analysts have warned of heightened volatility as major European firms scrap dividends, withdraw financial forecasts and cut costs to ride out an economic slump.
Sources said Lufthansa <LHAG.DE> aimed to finalise a state aid rescue package worth up to 10 billion euros ($10.8 billion) next week as the coronavirus crisis forced it to ground almost all of its planes.
Its shares fell 6.6% to the bottom of the STOXX 600, a day after it also reported a first-quarter loss of 1.2 billion euros.
Global equity markets also headed lower as a closely watched experimental drug developed by Gilead Sciences Inc <GILD.O> failed to help patients with severe COVID-19 in a clinical trial, even as the drugmaker said findings were inconclusive because the study was terminated early.
“There’s a lot of hope riding on a cure, and with optimism around remdesivir as a top view on the health care section, it’s a bit of blow for the market at weeks end,” said Stephen Innes, chief global markets strategist at AxiCorp.
The European banking index <.SX7P> fell 2.6% as S&P cut Commerzbank’s <CBKG.DE> credit rating by a notch and lowered its outlook for Deutsche Bank <DBKGn.DE> to negative from stable.
In a bright spot, Swiss food giant Nestle <NESN.S> rose 2.1% after reporting its best quarterly sales growth in nearly five years as consumers stockpiled its products ahead of the lockdowns.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Saumyadeb Chakrabarty)