European stocks fell the most in seven weeks on concern there will be further lockdowns as coronavirus cases rise, while HSBC Holdings helped lead banks lower amid a potential threat to its expansion plans in China.
The Stoxx Europe 600 Index dropped 2.7% as of 10:58 a.m. in London and the FTSE 100 Index slid on signs London is heading for a second lockdown. HSBC retreated after the Chinese Communist Party’s Global Times newspaper said that it’s a candidate for the country’s “unreliable entity list.” Banks also fell after an investigative report on lenders’ lapses in reporting suspicious activity.
European equities are sliding on worries a resurgence of Covid-19 will prompt further restrictions and hamper a nascent economic recovery. Germany’s health minister said the trend of cases in Europe is “worrying,” while the UK’s Chief Medical Officer is set to warn on Monday that the country is at a “critical point.”
“Virus resurgence is a clear reality check for market participants who have been somewhat complacent regarding the trajectory of the markets,” said Tradition strategist Stephane Ekolo. Earnings-per-share revisions are likely to deteriorate, he said. “All in all, it is a tug war between expectation and reality.”
Also in focus is a re-calibration of industry classification within the Stoxx 600 taking effect on Monday. The European benchmark is gaining a 20th sector - personal care, drug and grocery stores - with several members relocating from the retail and personal & household-goods sectors. Some other sectors have been renamed.
Spain’s IBEX 35 Index was among the worst performers in western Europe, down 3.4%. Germany’s DAX Index slid 3%. Travel and leisure shares and lenders were the worst industry performers.