European Stocks Slump as Virus Mutation Fuels New Lockdown Fears

European equities fell the most in nearly two months as the U.K. and the European Union failed to make progress on Brexit talks and several major countries moved to suspend travel from the U.K. amid concerns about a new strain of Covid-19, which could lead to more lockdowns.

The Stoxx Europe 600 Index tumbled as much as 3.6%, the biggest drop since Oct. 28, before closing 2.3% lower in London. Such cyclical sectors as banks, energy and travel paced the declines. The FTSE 100 Index dropped as much as 3.3% before closing 1.7% lower.

Investor concern is increasing after talks between the U.K. and European Union over the Brexit trade deal missed another deadline this weekend, while Prime Minister Boris Johnson announced new virus-related restrictions for London and southeast England. After the U.K. government warned that a new strain of the coronavirus is “out of control,” France and Germany were among countries that suspended flights from the U.K.

European Stocks Slump as Virus Mutation Fuels New Lockdown Fears

“We see growing uncertainty about a new, more infectious, strain of coronavirus spreading across parts of England,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg Bank. This, along with the travel curbs, “is why we see the pound plunging and risk markets slightly retreating. Until we get more clarity, safe havens remain in demand.”

U.K. travel, leisure and retail shares slumped on Monday, while stay-at-home stocks, like Ocado Group Plc, got a boost. Airlines that were expecting a lift around the festive period were among the worst hit, with British Airways-parent International Consolidated Airlines Group S.A. falling as much as 20% and Easyjet Plc down as much as 18%.

Among major country indexes, Spain’s IBEX 35 Index declined the most, down 3.1%. Banks paced the retreat, along with IAG.

Energy shares were also among the hardest hit as oil fell. Total SE and Royal Dutch Shell Plc retreated more than 3.5% each.

©2020 Bloomberg L.P.

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