Markets struggle as coronavirus hammers economies worldwide

Asian and European stocks struggled Friday on news of rapidly-shrinking economic activity, highlighting the "devastating impact" of coronavirus on the global economy, analysts said.

A tweet from US President Donald Trump suggesting delaying November's elections also jolted investors, helping send the euro soaring to a new two-year peak at $1.1909 in early Asian deals.

Equities in Europe aimed higher despite more grim corporate earnings, and as nations in the region unveiled the extent of historic economic devastation wrought by Covid-19.

France's economy contracted by a record 13.8 per cent in the second quarter, Spain went into recession after its gross domestic product slumped 18.5 per cent, Portugal's economy contracted 14.1 per cent, and Italy's GDP plunged 12.4 per cent.

Europe as a whole was hammered by its sharpest recorded contraction in the second quarter, with GDP down 12.1 per cent in the eurozone and 11.9 per cent across the Union bloc.

GDP figures released today confirmed the devastating economic impact of the pandemic," noted Oxford Economics analyst Rosie Colthorpe.

"Today's GDP figures all showed historic contractions in output, but that the pandemic has caused such massive economic damage is not a surprise."

Historic contractions have been additionally recorded in Germany (10.1 per cent), Belgium (12.2 per cent), Austria (10.7 per cent) and Mexico (17 per cent).

Across the Atlantic, the Commerce Department sent shockwaves across markets with news that the US economy contracted 32.9 per cent between April and June as businesses were shut down to prevent the spread of the killer disease.

That was the worst US quarter since records began in the aftermath of World War II.

The numbers added to fears about the long-running economic impact of Covid-19 and overshadowed a better-than-forecast read on Chinese factory activity that suggested the country is slowly emerging from the crisis.

Frankfurt stocks rebounded somewhat on Friday, having tanked 3.3 per cent on Thursday after showed Germany's powerhouse economy shrank a record 10.1 per cent in the second quarter.

"It was a grim day at the office for the global economy yesterday as the extent of the Covid-19 damage was laid bare," said PVM analyst Stephen Brennock.

"Europe's biggest economy shrunk by ... the biggest fall since 1970 and wiped out nearly a decade of German growth.

"Likewise, US GDP contracted by a whopping 32.9 per cent at an annualised pace over the same period. The slump was slightly less than feared but still the worst since government records began in 1947.

"What is more, this puts the world's biggest economy firmly in recession after posting negative growth in the first quarter."

In Asia, Tokyo and Sydney were worst-hit with traders worried about a fresh spike in infections in Japan and Australia.

Hong Kong retreated but Shanghai rose 0.7 per cent after China said its closely watched purchasing managers' index on manufacturing improved for a second straight month.