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European stocks extend losses as virus fears dominate

European stocks extended losses on Tuesday, as worries about the economic fallout of tighter coronavirus restrictions in the continent countered gains from upbeat results from UK blue-chip companies HSBC and BP. The pan-European STOXX 600 index fell 0.9% after closing at a one-month low on Monday when markets were hammered by rising infections in the United States and Europe and fading hopes of a stimulus package before the U.S. presidential election.

Reuters | Updated: 27-10-2020 15:29 IST | Created: 27-10-2020 15:16 IST
European stocks extend losses as virus fears dominate

European stocks extended losses on Tuesday, as worries about the economic fallout of tighter coronavirus restrictions in the continent countered gains from upbeat results from UK blue-chip companies HSBC and BP.

The pan-European STOXX 600 index fell 0.9% after closing at a one-month low on Monday when markets were hammered by rising infections in the United States and Europe and fading hopes of a stimulus package before the U.S. presidential election. The German DAX shed 0.9% after hitting a four-month low a day earlier, while France's CAC 40 fell 1.6% to a one-month low as the country grappled with a runaway infection rate.

German Chancellor Angela Merkel is planning a "lockdown light" in Europe's largest economy that would mainly focus on the closure of bars and restaurants to slow down the second wave of infections, newspaper Bild reported. Travel & leisure were among the top decliners, down 1.8%, while retailers dropped 1.7%.

"There is continued malaise (in markets) over the rise in European COVID-19 cases," said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. "There's an expectation that some of the things that were kept sacrosanct, such as keeping businesses open, might need to reconsidered."

Losses in UK's FTSE 100 were limited by a 5.7% jump in Europe's biggest bank HSBC after the lender signaled a pandemic-induced overhaul of its business model, accelerating plans to shrink in size and slash costs. Spain's Santander gained 3% as it expects 2020 core profit to beat market expectations, helped by additional cost savings of 1 billion euros.

BP rose 1.3% as it swung back to a small profit in the third quarter. Third-quarter earnings remain largely positive. Out of the 27% of the STOXX 600 companies that have reported so far, 73% have beat profit expectations, according to Refinitiv data.

French consulting and IT services provider Capgemini jumped 5% after confirming its full-year targets. Tobacco group Swedish Match climbed 5.4% as it reported a bigger-than-expected rise in quarterly profit on the back of higher sales of smokeless products.

However, miners fell 1.7%, dragging markets lower, after Liberum analysts downgraded stocks of Rio Tinto, Antofagasta, and KAZ Minerals. Meanwhile, data showed profits at China's industrial firms rose at a slower pace in September, hurt by factory-gate deflation and rising raw materials costs.


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