European Stocks Tumble to May Low as New Lockdown Fears Spread
European Stocks Tumble to May Low as New Lockdown Fears Spread
(Bloomberg) -- European equities fell the most in a month, with the DAX Index entering a correction as Germany and France prepared for harsher coronavirus-related restrictions.
The Stoxx Europe 600 Index dropped 3% to close at its lowest level since May 22. All 20 sectors were in the red, with cyclicals such as autos, construction and miners leading losses. The DAX fell 4.2%, taking its drop since an October high to more than 10%. France’s CAC 40 Index slid 3.4%.
Investors fear a repeat of February’s market selloff as restrictions get tougher in Europe to curb rising coronavirus cases, while the U.S. election and difficult fiscal stimulus negotiations add to the uncertainty. German Chancellor Angela Merkel reached a deal for a one-month partial lockdown, and French President Emmanuel Macron prepared to announce tougher restrictions that may also include a shutdown.
“It is not immediately apparent that this fiscal support will be as significant at the second time of asking, hence the sharp slides we are now seeing in equity markets,” said Michael Hewson, chief market analyst at CMC Markets.
Corporate updates provided relief to some shares. Delivery Hero SE climbed after its full-year revenue forecast beat estimates.
Cyclical stocks were particularly under pressure because a new round of lockdowns is likely to stall the nascent economic recovery and hurt such sectors as travel and leisure.
“In Europe, the main fear is that a new lockdown will constrain the economy, and this affects cyclical stocks,” according to Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “We have the fall and winter ahead of us, we don’t know when the vaccine will come, investors don’t know how to handle the situation. Uncertainty is the worst for the market.”
Market players are also bracing for the U.S. elections next Tuesday and the possibility of a contested result, which is likely to fuel volatility across global markets.
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