European shares in worst week since mid-June as Covid-19 fears haunt investors

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 5, 2020. Picture: REUTERS/Staff

European stocks recorded their worst weekly decline since mid-June, as investors feared that a second wave of coronavirus infections will hamper economic recovery, while banking stocks sank to an all-time low.

The pan-European Stoxx 600 index slipped even as Wall Street marked gains on signs that US lawmakers were making progress on a $2.2 trillion stimulus package that could be voted on next week.

Wall Street’s main indexes rose, led by technology-related stocks, but were still on track for their longest weekly losing streak in a year. 

The European index shed 3.6% in a week dominated by concerns about new coronavirus restrictions in Europe, a faltering stock rally in Wall Street’s technology giants and worrying economic data from both sides of the Atlantic.

France and Britain set new records of daily Covid-19 infections during the week, while the Spanish government recommended reimposing a partial lockdown on all of the city of Madrid after the country surpassed 700,000 cases, the highest number in western Europe.

“New restrictions in Europe, less fiscal support, fading liquidity impulse and election risk should weigh on activity in Q4,” European equity strategists at Barclays wrote in a note. 

“Economic surprises are starting to roll over from all-time high levels,” they said.

European banks sank to a fresh record low as investors shunned the sector hit by a cocktail of lower global borrowing costs, rising bad loans due to the economic downturn and dirty money scandal that made it the worst performer this week.

Bookmaker William Hill surged by over 43% after revealing that it had received rival takeover proposals from buyout firm Apollo and US casino operator Caesars Entertainment. 

Ladbrokes and Bwin brand owner GVC jumped 16.7% and Paddy Power owner Flutter Entertainment gained 6.8%, helping reverse early losses in travel & leisure stocks. 

Still, worries about new travel restrictions weighed on airlines, with British Airways and Aer Lingus-owner IAG, Lufthansa, and Air France-KLM down between 0.6% and 3.3%.

Automakers fell 1.4% after an industry body said British car production fell by an annual 45% in August, as the sector continues to suffer due to the fallout from the virus outbreak.

Swedish home appliance maker Electrolux rose almost 3% after saying that it would propose reinstating dividends after a recovery in earnings and cash flows during the third quarter.