Lockdown worries knock European stocks, banks hit by reports of illicit money flows

European stocks headed for their worst fall in almost two months on Monday, hit by worries about a surge in coronavirus cases across the continent and a slide in HSBC and Standard Chartered following reports that put the UK banks among those moving large sums of allegedly illicit funds over the past two decades.

The pan-European STOXX 600 slumped 2.2pc, further distancing itself from a one-month closing high hit last week, with Britain's banking-heavy FTSE 100 down 2.7pc.

Asia-focussed lender HSBC fell 4.0pc, hitting new lows since March 2009, and Standard Chartered dropped 4.4pc after BuzzFeed and other media reports said they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

Barclays and Deutsche Bank, which were also listed in the reports, fell 5.6pc and 5.8pc, respectively.

Meanwhile, a report from China's state-run Global Times suggested that HSBC could be a possible candidate for inclusion in the country's "unreliable entity list" that targets foreign firms which violate Chinese laws or commit "illegal acts".

Europe's banking sector, already down about 40pc this year as lenders struggle from the fallout of the COVID-19 pandemic and depressed interest rates, fell 4.7pc.

"The continued move lower in global rate expectations is presenting an ever increasing headwind to earnings," said Russell Quelch, financials analyst at Redburn. "Until there's a let up on that front, I can't see the sector performing very well."

Fresh coronavirus-led restrictions in Spain and other European countries and news that British Prime Minister Boris Johnson was pondering a second lockdown in Britain sent Europe's travel and leisure index down 5.3pc.

Among other individual stocks, Britain's Rolls-Royce Holdings slumped 9.6pc after the aero-engine maker said it was looking to raise up to 2.5 billion pounds ($3.2 billion) in an effort to strengthen its balance sheet.

German telecom 1&1 Drillisch dropped 28pc after warning that an increase in the cost of its network access deal with Telefonica Deutschland would hit profits this year. Its parent United Internet fell 26.1pc.

Adding to recent string of M&A activity, Play Communications soared 37.2pc after French telecoms group Iliad said it plans to acquire the Polish mobile phone operator in a 3.5 billion euros ($4.15 billion) deal. Iliad slipped 2.3pc.