European markets traded lower on Wednesday, despite the region starting to lift restrictive measures in various countries to allow the economies to gradually restart.
The pan-European Stoxx 600 fell 1% in early deals, with oil and gas stocks sliding 3.4% to lead losses while the food and beverages sector bucked the downward trend to add 0.7%.
Confidence among investors was further hit on Tuesday after the International Monetary Fund said the global economy in 2020 will likely suffer the worst financial crisis since the Great Depression this year, due to the impact of the Covid-19 pandemic.
The IMF now expects the global economy to contract by 3% in 2020. By contrast, in January it had forecast a global gross domestic product expansion of 3.3% for this year.
The U.S. said Tuesday that it will suspend funding to the World Health Organization while it reviews the agency’s response to the Covid-19 pandemic, President Donald Trump announced Tuesday, saying the international health agency made mistakes that “caused so much death” as the coronavirus spread across the globe.
United Nations Secretary General Antonio Guterres responded by calling for unity and solidarity, and said that now is not the time to reduce resources in the fight against the coronavirus.
There had been hopes in Europe that life could return to normal soon as various countries have started to tentatively lift restrictions on public life and businesses that have crippled economies during the pandemic.
Spain reopened some construction sites and manufacturing industries Monday, Italy has allowed some parts of the country to reopen bookshops and stationary shops, as well as shops selling children’s clothes, on Tuesday. Denmark is due to reopen elementary schools and kindergartens on Wednesday.
Other countries, such as the U.K. and France, meanwhile, are looking to extend lockdown measures into early May.
There are no major European earnings Wednesday. On the data front, consumer price inflation data is expected from Spain, Italy, France and Sweden.