(Bloomberg) -- European stocks erased the day’s declines on the optimism that more stimulus measures will limit the fallout from the deadly pandemic.
The Stoxx Europe 600 Index closed up less than 0.1% after losing as much as 1.5% today after finance chiefs in the region failed to agree on an economic recovery plan. Travel stocks led the gains along with technology, while miners and insurance companies slumped.
The U.S. is pushing for additional support to weather the pandemic, with the top Democrats in Congress Wednesday proposing lifting the next round of economic stimulus to $500 billion. While the coronavirus remains a critical issue, Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, said the start of a turnaround in the fight against the disease could come after this week.
European stocks have been rebounding from their March low, boosted by stimulus measures and optimism that the virus outbreak is stabilizing in parts of Europe. Germany’s DAX Index on Tuesday exited its shortest bear market on record, before fresh declines followed today.
Risk sentiment dimmed earlier on Wednesday after European Union finance chiefs couldn’t agree on the steps needed to counter the impact of the virus. Shares trimmed losses after Germany’s finance minister said an agreement is close and likely to take place before Easter.
“Words could mean more to the markets this week than numbers,” said Christopher Smart, chief strategist at Barings Investment Institute. “Economic data will continue to be terrible and the curves of new infections will flatten at different locations at different speeds. The degree of market swings still shows how uncertain the situation is.”
Data, meanwhile, stoked pessimism. France’s central bank estimated that its economy shrank the most since World War II in the first quarter of the year. And Germany’s leading research institutes forecast the country’s GDP will shrink 4.2% this year before expanding in 2021.
In the latest data on the spread of the virus, the number of new infections in Germany rose the most in three days. Britain, U.S. and Italy may see the number of virus-related deaths exceed 5,000 in the coming week, according to a forecast by Imperial College London.
“We do believe that we’ll get out of this and the recovery will be quite strong, but the dip in the meantime is pretty significant,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs Group Inc., said on Bloomberg TV. “Because this is effectively a stopping of demand, from which there should be a recovery, as long as there isn’t too much second-round effect damage in the economy during the lockdown, you would expect quite a strong rebound after.”
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