European equity markets closed lower on Friday, with travel, banking and auto shares leading declines as a resurgence in COVID-19 cases across the continent rekindled fears about the pandemic’s effects on a nascent economic recovery.
The pan-European STOXX 600 retreated 0.7 percent, with the banking-heavy Spanish index down 2.2 percent and the French and Italian bourses more than 1 percent lower.
London’s FTSE 100 slipped 0.7 percent, with International Airlines Group, EasyJet PLC and cruise operator Carnival Corp down between 8 percent and 15 percent as talk of a second lockdown in the UK did the rounds after new COVID-19 cases almost doubled to 6,000 per day.
Travel and leisure was the worst-performing sector, down 3.5 percent.
Other European nations from Denmark to Greece announced new restrictions to curb surging COVID-19 infections in some of their largest cities.
“If the uptick in cases becomes strong enough that lockdowns have to be tightened to a point that it derails the economic recovery, then it becomes a risk factor,” Wisdom Tree Investments Inc associate director of research Mobeen Tahir said.
The banking index fell 2.6 percent, hitting its lowest level since May 26 and on course for record lows as major central banks pledged to keep interest rates lower for a long time, with the Bank of England looking at taking borrowing costs to sub-zero levels, if needed.
Sparking hopes of consolidation among lenders battling the fallout from the COVID-19 pandemic, CaixaBank SA agreed to buy state-owned Bankia SA for 4.3 billion euros (US$5.1 billion) to create Spain’s biggest domestic bank.
Bankia fell 4.8 percent and Caixabank was down 2.2 percent after rallying in the run-up to the announcement.
Swedbank AB, SEB SA, Handelsbanken AB and Nordea Bank AB were down between 1.8 percent and 5.3 percent on fears that the Swedish banks will bear the brunt of a proposed government “risk tax.”
Separately, Sweden’s financial watchdog said that it was investigating Swedbank for potential market abuse.
The STOXX 600 still eked out a 0.2 percent weekly gain as some major retail companies showed resilience in earnings earlier this week, and a string of takeovers enlivened global merger and acquisition activity.
The London Stock Exchange Group entered exclusive talks to sell Borsa Italiana SpA to France’s Euronext NV, driving its shares up 4.3 percent.
Swedish telecoms gear maker Ericsson AB was up 1.3 percent after it agreed to buy US-based wireless networking company CradlePoint Inc in a US$1.1 billion deal.
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