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European stocks slump amid extended lockdown and tighter border restrictions

LaToya Harding
·Contributor
·3-min read

Watch: European stocks slump amid extended lockdown

Stocks in Europe fell into the red on Monday amid chatter there could be tighter border restrictions and extended lockdowns to keep the new COVID-19 variant at bay.

The FTSE 100 (^FTSE) closed down 0.84%, while the DAX (^GDAXI) slipped 1.68%. The CAC (^FCHI) was down 1.6% as the French death total crossed 72,000 over the weekend.

Investors remained cautious that an extension to stricter lockdown restrictions would raise the prospect of longer-term economic damage.

A frontline staff getting vaccine at the NHS Louisa Jordan Hospital in Glasgow, Scotland. Photo: Jane Barlow/PA via Getty
A frontline staff getting vaccine at the NHS Louisa Jordan Hospital in Glasgow, Scotland. Photo: Jane Barlow/PA via Getty

Richard Hunter, head of markets at Interactive Investor, said: “With the economy still on a tight leash, the UK is inching towards some kind or return to normality as the vaccine rollout continues apace.

“However, recent economic indicators and the lack of any breakthrough news has removed some of the shine from the FTSE 100’s bright start to the year, although the index remains ahead by just under 4% heading into the final week of January.”

READ MORE: DAVOS 2021: Biggest coronavirus vaccination rollout threat isn't about supply — it's conspiracy theories

Sterling echoed the timid performance of the FTSE. Against the dollar it was 0.12% lower at the European close to $1.3667, while it rose 0.15% to €1.1262 against the euro.

UK ministers have refused to make promises about when the UK will come out of its current national lockdown. At the end of last week prime minister Boris Johnson said it was “too early to say” when curbs would be eased, warning over the contagiousness of a new coronavirus variant.

Home secretary Priti Patel also then said at a Downing Street press conference it was “far too early” to speculate when asked if people could book foreign holidays this summer. She reiterated the need to curb current non-essential travel.

READ MORE: UK lockdown sends economy spiralling at sharpest rate since last May

Travel and leisure stocks were under pressure in particular. British Airways owner IAG (IAG.L) led fallers in the airline sector on London’s benchmark index, down about 7%, while aerospace engineer Rolls-Royce (RR.L) slumped 5%.

On the FTSE 250, easyJet (EZJ.L), TUI (TUI.L) and Wizz Air (WIZZ.L) all similarly nosedived.

Connor Campbell at Spreadex said: “The UK markets are reflecting the tone of its officials. The government has struck an unusually pessimistic tone over the last few days.

“Learning from past mistakes, ministers have refused to make promises about when the UK will come out of its current lockdown, including refusing to commit to schools opening post-Easter.”

Across the pond bourses were also in the red, with the S&P 500 (^GSPC) down 0.33% at 4:30pm, despite opening higher. The Dow Jones (^DJI) dipped 0.59%, and the Nasdaq was (^IXIC) flat after being more than 1% higher afte the ball in New York. It comes as US markets continued to set new records last week.

Asian shares also rose on Monday amid some hopes for recovering economies slammed by the pandemic. Traders were turning their attention to upcoming company earnings.

Hong Kong's Hang Seng (^HSI) soared 2.5% and Japan's benchmark Nikkei 225 (^N225) gained 0.67%. The Shanghai Composite (000001.SS) gained 0.48%.

Sentiment in Asia was boosted by reports that China had surpassed the US to be the largest recipient of foreign direct investment in 2020 with $163bn (£119bn) in inflows.

WATCH: Lockdown working in UK as infection rate falls