A sell-off on Wall Street hit the already shaky confidence of European investors on Monday, deepening losses seen on the continent.
Major markets across European and the UK opened around half a percent lower on Monday morning. Losses deepened as the day wore on, notably after a lower open on Wall Street.
The S&P 500 (^GSPC) was down 0.4% in New York by the time trade ended in Europe. The Dow Jones Industrial Average (^DJI) had given up 70 points and the Nasdaq (^IXIC) was 0.8% lower. Twitter (TWTR) sunk 5.5% as investors reacted to the social media platform’s permanent suspension of President Trump.
Democrat lawmakers in the US began an attempt to impeach US President Donald Trump over “incitement of insurrection” linked to last week’s attack on the Capitol.
“While that won’t have too much of an effect on actual governance – something Trump hasn’t been interested in since November anyway – it is indicative of an unstable, and potentially violent, few months in America,” said Connor Campbell, a financial analyst at SpreadEx.
The shaky start on Wall Street added to a cautious mood in Europe. Stocks had begun the session on the back foot amid concerns about the COVID-19 pandemic and its impact on economic growth.
“European stocks have started the week on a softer note after the decent gains seen over the past few days, as concerns over even tighter restrictions prompt some profit taking,” said Michael Hewson, chief market analyst at CMC Markets.
Reports suggested lawmakers in Britain were considering tightening restrictions across England even further.
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UBS cut its forecast for eurozone growth this year by 120 basis points, citing “tighter and longer lockdowns.” The investment bank said it now expects negative growth prints for the final quarter of 2020 and the first quarter of 2021.
Elsewhere, economists at JP Morgan and Bank of America warned about the long-term economic impacts of Britain’s free trade agreement. JP Morgan said the Brexit deal was “thin gruel” that could leave the economy 10% worse off. Bank of America said between 5% and 7.5% of growth could be lost over the long-term as a result of the deal.
Chinese stocks slipped overnight amid continued high tensions with the US. The Shanghai Composite (000001.SS) shed 1% and the Shenzen Component (399001.SZ) fell 1.3%. The Hong Kong Hang Seng (^HSI) rose 0.1%.