U.S. Markets

European stocks dip on second wave fears, Brexit uncertainty

(Reuters) - European shares ended slightly lower on Wednesday, extending a decline from the previous day as surging coronavirus cases stoked fears of more sweeping lockdowns, with uncertainty over a Brexit trade deal also dampening the mood.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 21, 2020. REUTERS/Staff

The pan-European STOXX 600 index .STOXX fell 0.1%, with food and beverage .SX3P, healthcare .SXDP and retail .SXRP stocks leading declines.

Hopes of more stimulus to help businesses ride out the COVID-19 pandemic helped European shares track gains in global equities in the past few weeks, but prospects of more lockdowns and signs of a delay in a vaccine have since dented sentiment.

Italian Prime Minister Giuseppe Conte on Tuesday imposed new restrictions on gatherings, restaurants, sports and school activities.

“There is still hope that targeted restrictions might be able to contain the spread of the virus,” said Commerzbank analyst Thu Lan Nguyen.

“If infection trends were to continue, this hope will start to dwindle though (and) it would look to the market as if the U.S. was handling the pandemic better after all.”

London's FTSE 100 .FTSE fell 0.6%, its third straight day of declines on growing domestic political wrangling over new business restrictions. [.L]

A stronger pound also weighed on the export-heavy index as sources said the European Union and Britain were set to prolong Brexit talks past a mid-October deadline imposed by British Prime Minister Boris Johnson.

The EU summit on Oct. 15-16 is set to conclude that progress so far is “still not sufficient” to seal a deal, and will also step up preparations for an abrupt split without provisions to avoid trade tariffs or quotas.

Meanwhile, data on Wednesday showed euro zone industrial production slowed sharply in August as expected, mainly due to a plunge in the output of capital goods even though it was cushioned to some extent by higher production of durable consumer goods.

In company news, Italy's Atlantia ATL.MI jumped 9.2% to the top of the STOXX 600 after entering exclusive talks until Oct. 18 with state lender Cassa Despositi e Prestiti over the sale of the group's motorway assets.

European food-ordering firm Just Eat NV TKWY.AS rose 6.5% as it said it had received 46% more orders in the third quarter, thanks to a surge in online orders.

Overall, third-quarter earnings at STOXX 600 firms are expected to have declined by 36.7% year-on-year, smaller than a 50.8% plunge in the second quarter, according to data from Refinitiv.

Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Subhranshu Sahu/Arun Koyyur and Emelia Sithole-Matarise