European stocks slump as tougher virus control measures loom

France and Germany are reportedly considering strict new measures to bring a spike in new COVID-19 cases under control.

German Chancellor Angela Merkel is reportedly considering closing all bars and restaurants to contain a renewed surge in coronavirus cases, raising concerns about Europe's economic recovery [File: Krisztian Bocsi/Bloomberg]

Losses accelerated across European stock markets on Wednesday, with the benchmark STOXX 600 tumbling to its lowest level since late May on fears of a new national lockdown in France and tighter curbs elsewhere to combat a surge in coronavirus cases.

The pan-European STOXX 600 index fell 2.4 percent, while Germany’s DAX and France’s CAC 40 plunged 3.3 percent and UK’s FTSE 100 dropped 2.2 percent.

The French government has been exploring a new, national lockdown from midnight on Thursday, BFM TV reported, albeit a slightly more flexible one than the two-month shutdown that began in mid-March.

President Emmanuel Macron will give a televised address later on Wednesday, his office said.

Meanwhile, German Chancellor Angela Merkel wants to close all restaurants and bars from November 4, according to a draft resolution seen by the Reuters news agency, while The Telegraph newspaper reported that British Prime Minister Boris Johnson is under pressure to implement a new lockdown.

“Global markets look incredibly nervous, the mix of rising COVID-19 cases and deaths and the potential full lockdown in France, add this to the uncertainty ahead of the US elections and you have a very poor backdrop,” said John Woolfitt, director of trading at Atlantic Capital Markets.

“I don’t expect this to be long-term, but nervousness will continue until elections are done and some form of steadying in the COVID-19 numbers.”

Carmakers, banks, oil under pressure

Economically sensitive sectors such as carmakers, banks and insurers led declines, falling between 3.9 percent and 4.4 percent.

United States stock futures also slid more than 1 percent as investors stayed on the sidelines with no stimulus package in sight and just a week to go before the US presidential election.

Meanwhile, assets considered safe havens in times of crisis, such as US Treasuries, the US dollar and Japanese yen rose.

Concerns over weakening demand for energy and rising US crude stockpiles drove oil prices sharply lower, with US West Texas Intermediate falling 3.9 percent and Brent crude losing 3.1 percent to below the $40-per-barrel mark.

Oil price chart [Bloomberg]

The downbeat mood overshadowed a batch of upbeat quarterly results from European companies.

Deutsche Bank AG reported a surprise swing into quarterly net profit and upgraded the revenue outlook for its investment bank, but its shares fell 4.2 percent.

French retail giant Carrefour delivered its strongest quarterly underlying sales growth for at least 20 years. Shares of the group, however, dropped 2.5 percent.

German online takeaway food company Delivery Hero was among the few gainers, rising 4.1 percent, after it raised its guidance for 2020 sales for the second time this year.

Source: News Agencies