Europe close: Stocks down after IMF cuts forecasts, Covid-19 cases rise

Stocks in Europe finished sharply lower after the International Monetary Fund slashed its forecast for global economic growth in 2020 and as investors assessed the risks around a possible second wave of Covid-19 infections around the globe.

On top of a recent rash of Covid-19 outbreaks in multiple European countries, record rates of infection in various US states led Pantheon Macroeconomics to predict that the daily tally in the States could hit 100,000 by 10 July.

According to the IMF, global GDP growth will shrink by 4.9% this year, down from an April forecast for a downturn of 3.0%.

Against that backdrop, the benchmark Stoxx 600 fell 2.78% to 357.17, alongside a drop of 2.92% to 4,871.36 for the French Cac-40 while the FTSE Mibtel was down 3.42% at 19,162.98.

"Stocks are in the red across the board, with rising coronavirus fears coupled with a resurgent US-EU trade war," said IG's Josh Mahony.

"With the quarter drawing to a close next week, there is a strong chance that major quarter-end re-balancing could drive further downward pressure on stocks."

Also weighing on sentiment was news that the US was mulling tariffs on $3.1bn of exports from the European Union.

According to some market commentary, the aim was to forestall EU retaliation for earlier levies that had been approved by the World Trade Organisation.

Morgan Stanley nonetheless wrote the day before that EU retaliation was unlikely so as to avoid a further headwind for the Continent's still struggling recovery.

The latest batch of economic data did yield some positive surprises but economists were quick to highlight how it also underscored the depth of the current downturn.

The closely-followed German business confidence index from the country's IFO institute rose from May's level of 79.7 to 86.2 (consensus: 85.0).

In France meanwhile, INSEE reported that its business confidence gauge rebounded from 60 points for May to 78 in June (consensus: 72.0).

Nevertheless, the IFO index had still only recovered half its losses since the start of the pandemic and the French gauge remained well-below its long-run average of approximately 100.0.