Rollercoaster session for stocks as uncertainty reigns

·Senior City Correspondent, Yahoo Finance UK
·3 min read
Gita Gopinath, IMF Chief Economist and Director of the Research Department, speaks at a briefing  during the IMF and  World Bank Fall Meetings on October 15, 2019 in Washington, DC. - The world economy is slowing to its weakest pace since the global financial crisis, amid continuing trade conflicts that have undercut business confidence and investment, the IMF said Tuesday. It cut the growth forecast for 2019 to 3.0 percent in its latest World Economic Outlook report, and lowered the 2020 estimate to 3.4 percent. The report warned that the global economy is experiencing "a synchronized slowdown and uncertain recovery."International Monetary Fund chief economist Gita Gopinath said "the global outlook remains precarious" and warned "there is no room for policy mistakes." (Photo by Olivier Douliery / AFP) (Photo by OLIVIER DOULIERY/AFP via Getty Images)
IMF chief economist Gita Gopinath said the COVID-19 pandemic has left 'significant scarring' on the global economy. (Olivier Douliery/AFP via Getty Images)

Stock markets around the world whipsawed on Friday, as a battle raged between bargain hunting and fears about the outlook for the global economy.

Thursday marked the worst sell-off for stocks since March — when COVID-19 was first hitting with full force— and the sell-off initially looked like it would continue into Friday. Major European markets had shed around 1% shortly after the opening bell.

However, indices quickly recovered and, after a choppy few hours, were trading solidly in the green by mid-afternoon, with gains of more than 1% across the board. Sentiment was helped by a strong open for US markets.

READ MORE: UK economy saw historic 20% crash in April lockdown

However, momentum faded as the session wore on and European markets ended the day mixed. The FTSE 100 (^FTSE) and the CAC 40 (^FCHI) both managed gains of 0.4%, while the DAX (^GDAXI) fell 0.1%.

“At one point it was looking like Europe was in for a strong rebound this Friday, led higher by a revitalising Dow Jones,” said Connor Campbell, a financial analyst at trading platform SpreadEx.

“Instead it started to limp towards the closing bell, investors seemingly losing confidence.”

US markets experienced similar volatility, although enjoyed more convincing gains. By the time trade ended in Europe, the S&P 500 (^GSPC) was up 1.6%, the Dow (^DJI) had climbed 2%, and the Nasdaq (^IXIC) was up 1.6%.

Investors globally looked to be torn between bargain hunting after Thursday’s steep sell-off and concerns about the economic fallout from COVID-19.

The rebound came despite signs of a resurgence of COVID-19 cases in the US and poor economic data and forecasts.

In the UK, GDP numbers showed the economy shrunk by a record 20% in April, which was worse than economists had expected.

“The economy will take a long time to recover from the pummelling inflicted by the COVID-19 pandemic,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

Separately, IMF chief economist Gita Gopinath warned that the outlook for the global economy was worsening.

In a video released on Friday, Gopinath said she was “quite concerned about the path of recovery”, as COVID-19 had left “significant scarring” on the global economy. Gopinath said new forecasts released by the IMF later this month would likely be more pessimistic than its outlook in April.

“Sentiment is further dented by the fresh comments by the chief economist of the IMF, who said that the world economy is growing much slower than anticipated and the scars of the coronavirus pandemic may linger for much longer,” said Naeem Aslam, chief market analyst at Avatrade.

READ MORE: UK recession to be worse than France, Italy, Spain, and Germany, warns OECD

Meanwhile, Houston, the largest city in Texas, was close to reimposing restrictions on residents on Friday as city officials reckoned with a resurgence in new COVID-19 cases.

Asian markets mostly fell overnight. The Nikkei (^N225) dropped 0.7% in Tokyo, the Hang Seng (^HSI) fell 1% in Hong Kong, and the Shanghai Composite (000001.SS) was flat.