European stocks reverse course to trade lower as virus worries mount

Investors fear new variants will stall economic recovery


European stocks fell slightly on Monday as investors sold economically sensitive sectors on worries that the spread of new coronavirus variants was stalling a global economic recovery.

The pan-European Stoxx 600 index slipped 0.1 per cent after marginal opening gains. Banking, mining, travel, and auto stocks fell between 0.4 per cent and 1.2 per cent, with investors unwinding bullish bets on the global economy as the Delta virus variant tears through large parts of Asia. Commodity-heavy UK shares fell 0.5 per cent, lagging continental European peers. Volatility picked up across global markets last week after US and China data raised fears that economic growth may have peaked, driving government bond prices higher and stocks lower.

Still, Wall Street indexes closed at record highs on Friday, while the Stoxx 600 hovered a few points away from its own peak. “The sharp decline in bond yields over the past week has not yet been reflected in stock markets or commodities, which remain close to record highs,” analysts at BCA Research wrote in a morning note. “A correction over the next few months cannot be ruled out.”

Meanwhile, European Central Bank president Christine Lagarde said the central bank will change its guidance on the next policy steps at its next meeting to reflect its new strategy and show it is serious about reviving inflation. ECB’s new strategy allows it to tolerate inflation higher than its 2 per cent goal, meant to reassure investors that policy won’t be tightened prematurely.

Investors moved into defensive parts of the stock market like utilities, real estate, and healthcare , which rose between 0.3 per cent and 0.9 per cent.

Daily Mail and General Trust jumped 3.8 per cent after it said its largest shareholder, Rothermere family, might take the British newspaper private in a £810 million deal, if the sales of its insurance risk unit and Cazoo business go through. France’s outdoor advertising company JCDecaux jumped 7.3 per cent after JPMorgan upgraded the stock to “overweight”, citing a sharp rebound in its air passenger numbers. French IT consulting group Atos slumped 15.1 per cent to the bottom of STOXX 600 after it cut full-year earnings forecast. - Reuters