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European stocks dip as infections rise and central banks 'sit on their hands'

Tom Belger
·Finance and policy reporter
·2-min read
The Shard and the City hall are seen as people enjoy the hot weather on the bank of the River Thames in London, following the outbreak of the coronavirus disease (COVID-19), London, Britain, May 31, 2020. REUTERS/Steven Watt
Shard building towers over City Hall, right, London. Photo: Steven Watt/Reuters

European stocks fell on Friday, after leading central banks held off announcing fresh stimulus and coronavirus infection rates rose in several parts of Europe.

The Europe-wide Stoxx 600 (^STOXX) was down 0.5% in afternoon trading, with travel and leisure stocks among the biggest fallers. Britain’s FTSE 100 (^FTSE) fell 0.5% and looked set for a second day of declines for leading listed companies.

Germany’s DAX (^GDAXI) lost 0.3%, while France’s CAC 40 (^FCHI) shed 1.1% by late afternoon in Europe.

Stocks were also in the red in the US as the European trading day came to an end. The S&P 500 (^GSPC) was down 0.5% and the Dow Jones (^DJI) was 0.2% lower, and the Nasdaq (^IXIC) lost 0.6%.

It came after the Bank of England its major monetary policies unchanged on Thursday, keeping interest rates at record low levels and maintaining the Bank’s programme of bond buying at £745bn ($966.6bn).

The US Federal Reserve had held interest rates near zero and signalled they were likely to stay that way until at least 2023 on Wednesday.

READ MORE: UK retail sales show fourth month of growth in August

Both central banks warned the outlook was “uncertain.” The Bank of England noted rising COVID-19 cases, uncertainty around the end of the furlough scheme, and Brexit risks meant it was still unusually difficult to forecast and risks remained high.

Concerns over infection rates in parts of Europe may have dampened the mood further among traders.

The UK government is under fire over shortages of coronavirus tests as cases have risen, and its scientific advisers have discussed a potential second national lockdown in October. 3,395 new cases were reported on Thursday, and Wednesday had seen the highest number of new cases reported in a day since May.

In the Czech Republic, new daily recorded cases exceeded 3,000 for the first time on Friday. Meanwhile France saw 10,593 cases reported by health officials on Thursday, a record daily high since the crisis began.

Watch: Bank of England leaves rates on hold

READ MORE: BoE warns furlough end and COVID-19 cases could derail economy

Michael Hewson, chief market analyst at CMC Markets UK, highlighted investors’ caution as cases rose, the World Health Organization sounded the alarm over Europe and central banks “decided to sit on their hands for the time being” on stimulus.

“Talk of new localised and targeted lockdowns, as well as curfews and quarantines appear to be becoming more commonplace, raising concerns about the resilience of the recovery we’ve seen thus far across Europe,” added Hewson.

Asian stocks had risen overnight, however. Japan’s Nikkei (^N225) rose 0.2%, the Hong Kong Hang Seng (^HSI) rose 0.5%, and China’s Shanghai Composite (000001.SS) rose 2.1%. The KOSPI (^KOSPI) in South Korea rose 0.3%.