Stimulus Hopes Boost US Stocks As European Shares Fall

Stock markets in Europe came under pressure Tuesday as fears resurfaced over a spike in coronavirus infections, while Wall Street stocks finished solidly higher on hopes for more stimulus from Washington.

Key eurozone markets Frankfurt and Paris closed around one percent down, well off their lows, while London even inched back into positive territory thanks to a weakening pound following grim British output data.

On Wall Street, the Dow Jones index reversed a weaker opening and finished up 2.1 percent.

The gains came as news reports said leading Republicans in the White House and on Capitol Hill were changing their stance on stimulus measures, including their prior opposition to extending supplemental unemployment benefits.

"The promise of fiscal stimulus is boosting peoples' economic expectations," said Chris Low, chief economist at FHN Financial.

But uncertainty about the impact of renewed lockdowns on the business outlook weighed after the reimposition of some containment measures in parts of the United States, Australia and Hong Kong.

"The shutdown fuels fears that the growing number of coronavirus cases will hamper the fragile economic recovery," said City Index analyst Fiona Cincotta.

US banking giants JPMorgan Chase, Citigroup and Wells Fargo together reported some $28 billion in credit costs for current and future bad loans due to the hit from COVID-19 closures.

JPMorgan added 0.6 percent after reporting better-than-expected profits. But Citigroup, which also topped expectations, fell 3.9 percent, while Wells Fargo shed 4.6 percent after reporting a $2.4 billion loss.

The British pound slid on data showing that the virus-plagued UK economy shrank by almost a fifth in the three months to April.

A weaker British currency tends to boost share prices of companies listed in London who earn much of their income in dollars.

News that Singapore's economy, considered a regional barometer in Asia, contracted a mind-boggling 41 percent in the second quarter also provided a stark reality-check for traders.