NEW YORK, June 5 — A rally in global stock markets petered out yesterday but resolute action from the European Central Bank to fight the coronavirus fallout put a floor under losses from investors cashing in on recent gains.

European bourses retreated after major gains earlier in the week, along with Wall Street indices, with investors anticipating a gloomy US jobs report today.

The euro rose and southern European bond yields slipped after the ECB added another €600 billion (US$2.91 trillion) to its already gigantic stimulus war chest, and said it would continue its pandemic bond-buying for another year at least.

But if boosted ECB support seems huge, so does the expected eurozone downturn it is designed to alleviate, with ECB chief Christine Lagarde forecasting a 2020 contraction of 8.7 per cent in the area’s gross domestic product (GDP).

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As countries gradually begin to reopen, there are signs of the slump “bottoming out”, Lagarde said, after just 0.1 per cent growth in January-March and a likely “significant contraction” in the second quarter. 

But “the improvement has been tepid compared with the speed at which economic indicators plummeted in the preceding months”, the former French finance minister added.

“Whatever it takes,” said Holger Schmieding at Berenberg. “Like finance ministers, central banks across the advanced world continue to do their utmost to contain the mega recession.”

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The ECB’s move came a day after Germany said it would pump €130 billion into a stimulus package to kick-start the region’s biggest economy.

At first, European stock markets were unimpressed, with investors locking into profits “after enjoying a very bullish session yesterday”, as David Madden, analyst at CMC Markets UK, put it.

But then, some cautious buying brought markets off their worst levels.

More jobless claims

While the Dow mustered a narrow gain, both the S&P 500 and Nasdaq retreated after weekly labor data showed another 1.9 million people applied for jobless claims last week taking the total to more than 42 million in the wake of coronavirus shutdowns.

The figures were a grim omen for today, when the Labor Department releases the all-important May jobs report that will likely show national unemployment increasing to closer to 20 per cent from 14.7 per cent in April, the highest unemployment rate in 90 years.

The market “went a little overboard,” said Peter Cardillo of Spartan Capital Securities, adding that, “Tomorrow’s unemployment numbers are going to be ugly.”

American Airlines surged 41.1 per cent as it announced it would add more flights in July on improving demand, suggesting the industry had seen the worst of the hit from the coronavirus shutdowns.

Delta Airlines and United Airlines both jumped around 15 per cent.

Key figures around 2050 GMT

New York - Dow: UP 0.1 per cent at 26,281.82 (close)

New York - S&P 500: DOWN 0.3 per cent at 3,112.35 (close)

New York - Nasdaq: DOWN 0.7 per cent at 9,615.66 (close)

London - FTSE 100: DOWN 0.6 per cent at 6,341.44 (close)

Frankfurt - DAX 30: DOWN 0.5 per cent at 12,430.56 (close)

Paris - CAC 40: DOWN 0.2 per cent at 5,011.98 (close)

EURO STOXX 50: DOWN 0.2 per cent at 3,261.67 (close)

Tokyo - Nikkei 225: UP 0.4 per cent at 22,695.74 (close)

Hong Kong - Hang Seng: UP 0.2 per cent at 24,366.30 (close)

Shanghai - Composite: DOWN 0.1 per cent at 2,919.25 (close)

West Texas Intermediate: UP 0.3 per cent at US$37.41 per barrel

Brent North Sea crude: UP 0.5 per cent at US$39.99 per barrel

Euro/dollar: UP at US$1.1331 from US$1.1233 at 2100 GMT

Dollar/yen: UP at ¥109.16 from ¥108.90 

Pound/dollar: UP at US$1.2588 from US$1.2575 

Euro/pound: UP at 89.99 pence from 89.33 — AFP