Stock markets drop as EU fails to strike coronavirus bailout

Stock markets mostly declined Wednesday as EU finance ministers failed to agree on a coronavirus bailout package for the hardest hit countries such as Italy and Spain.

The euro dropped against the dollar and pound, while oil prices gained ahead of a crucial producers' meeting on possible output cuts.

Eurozone finance ministers Wednesday failed to agree on a rescue plan to help hard hit member states face the coronavirus outbreak.

"European Union dysfunctionality is the talk of the town... with overnight squabbles seeing finance ministers ultimately fail in their bid to introduce an aid package worth half-a-trillion euros," said Joshua Mahony, senior market analyst at IG trading group.

The Bank of France, meanwhile, said the nation's economy contracted six percent in the first quarter, putting it in recession and marking the worst performance since 1945.

The German economy, Europe's biggest, is expected to shrink by nearly 10 percent in the second quarter as the coronavirus paralyses the country, leading research institutes warned Wednesday.

"The corona pandemic will trigger a serious recession in Germany," the six think tanks including Ifo, DIW and RWI said in their annual spring report.

While the deadly disease continues to sweep across the planet, signs that the rate of infections is possibly levelling out and countries are preparing to ease some lockdown restrictions had instilled a semblance of optimism this week.

However, uncertainty about how long the crisis will last and the damage it will inflict on the global economy was keeping traders on edge and hobbling any sustained rally.

Wall Street, where all three main indices soared at least seven percent at the start of the week, struggled to extend its rally and fell back into negative territory Tuesday.

The losses spilled over into Asia, with Hong Kong losing more than one percent, Singapore two percent, and Sydney and Seoul each 0.9 percent.

Shanghai ended down 0.2 percent.

However Tokyo jumped more than two percent, helped by a weaker yen and details of Japan's huge stimulus package worth $1 trillion amid a month-long state of emergency for Tokyo and six other regions in the country following a spike in coronavirus cases.

Oil prices climbed Wednesday, but the commodity continues to swing as traders keenly await Thursday's planned meeting of the world's top producers to discuss a possible output cut.

The commodity has been battered by the virus as lockdowns around the world bring the global economy to a standstill and drag on demand, while a price war between Russia and Saudi Arabia has compounded the crisis.

With Riyadh and Moscow taking part, there are hopes they may draw a line under their dispute.

Howie Lee, an economist at Oversea-Chinese Banking Corp. said that while a cut of 10 million barrels "would lend some support to prices", US participation was key, otherwise other producers would not be likely to take part.

Energy ministers from the Group of 20 will hold a meeting on the issue on Friday.