OCT 26 — European stocks fell today as Italy and Spain imposed fresh restrictions to control a resurgence in coronavirus cases, while shares in German heavyweight SAP slumped after it cut its 2020 outlook.
The pan-European STOXX 600 index declined 0.5 per cent and the euro zone blue-chip index tumbled 1.4 per cent, with risk appetite globally sapped by worries over slow progress on a new US stimulus bill and looming presidential election.
The German DAX dropped 2.0 per cent after software company SAP abandoned medium-term profitability targets and cautioned that its business would take longer than expected to recover from the pandemic hit.
Shares of Europe’s most valuable tech firm tumbled 18 per cent, set for their worst decline in 24 years, with the wider tech index down 5.2 per cent.
SAP’s earnings came as a blip in the third-quarter earnings season, which has been largely better than feared.
Meanwhile, Italy has ordered bars and restaurants to close by 6 p.m. and to shut public gyms, cinemas, while Spanish Prime Minister Pedro Sanchez announced a new state of emergency as many Southern European countries reported their highest number of Covid-19 cases in a single day.
Europe on Saturday became the second region after Latin America to surpass 250,000 deaths, according to a Reuters tally.
Nick Nelson, head of European equity strategy at UBS, said the Swiss bank’s target for STOXX 600 into the year-end is 340 points, about 5 per cent below the current level, in part due to the impact of the latest round of restrictions.
“Not a large move, but we see some modest downside into year-end partly because of the mobility restrictions and a slowdown in the macro momentum with PMIs falling below 50,” he said.
Surveys of euro zone purchasing managers last week showed economic activity slipped back into decline in October, heightening expectations for a double-dip recession as a second wave of virus sweeps across the continent.
Milan’s blue-chip index fell 0.9 per cent, even as ratings agency Standard and Poor’s upgraded Italy’s sovereign outlook to stable from negative.
Oil majors Total and Royal Dutch Shell fell over 1 per cent as crude prices slumped almost 3 per cent on worries surging Covid-19 cases in the United States and Europe would hurt demand.
London’s FTSE 100 was flat as banks found support after a media report that UK regulators are considering plans to allow banks to start paying dividends again next year.
Healthcare stocks also remained supportive, with AstraZeneca gaining 1.1 per cent after it resumed the US trial of its experimental Covid-19 vaccine. — Reuters
