EU says recession will be deeper than forecast

Technology companies and banks led stocks broadly lower on Wall Street Tuesday, as the market gave back some of the big gains it made the past couple of weeks. The sell-off snapped the S&P 500 index’s five-day winning streak. Bond yields fell and the price of gold rose, another sign of caution in the market, the AP reports

The selling followed a deeper pullback in France, Germany and elsewhere after the European Union’s executive arm said this year’s recession caused by the coronavirus pandemic will be deeper than forecast. It also said next year’s expected rebound could be weaker than expected. The S&P 500 fell 34.40 points, or 1.1%, to 3,145.32. The Dow Jones Industrial Average dropped 396.85 points, or 1.5%, to 25,890.18. The Nasdaq composite lost 89.76 points, or 0.9%, to 10,343.89.

“This is mostly linked to the epidemiological uncertainty.” The commission said the joint economy of the 27 nations in the European Union will shrink 8.3% this year, before growing 5.8% in 2021. In the previous forecasts released in May, it had forecast the economy would contract about 7.5% this year and bounce back 6% next year. 

"The road to recovery is still paved with uncertainty,” EU Economy Commissioner Paolo Gentiloni told reporters in Brussels Tuesday. “This is mostly linked to the epidemiological uncertainty.” The commission said the joint economy of the 27 nations in the European Union will shrink 8.3% this year, before growing 5.8% in 2021. In the previous forecasts released in May, it had forecast the economy would contract about 7.5% this year and bounce back 6% next year.

Underscoring the fragility, a separate report showed that industrial production in Germany rebounded by less than economists expected in May, and remains far below levels from before the pandemic caused factories to close.