LONDON: European stocks slumped to a three-week low on Tuesday, clocking their worst session in nearly two months, as a resurgence in COVID-19 cases raised fears of tighter restrictions, while energy stocks and miners rose on higher commodity prices.
The pan-European STOXX 600 shed 1.3%, with only the oil & gas and basic resources sectors trading higher. Energy stocks got a lift from rising oil prices after a move by the United States to tap into emergency reserves. Miners also rose, with analysts pointing to improving economic trends in Asia offering a boost.
“It’s looking pretty dire today in Europe. But we’re seeing commodities, particularly miners, do very well. Any stock that is able to look towards Asia, where at the moment those economies and consumer confidence seems to be going in the other direction, stand to do much better,” said Danni Hewson, financial analyst at AJ Bell.
Tech stocks in Europe tumbled 3.4%, marking its biggest one-day percentage fall in two months, as prospects of rising interest rates dented the appeal of the high-growth sector.
US President Joe Biden tapped Jerome Powell on Monday to continue as Federal Reserve chair, lifting bets of US rate hikes in 2022. Money market traders have now fully priced in a 10-basis-point rate hike by the European Central Bank in December 2022, up from 50% odds on Monday.
Growing nerves around a fourth wave of COVID-19 infections stalling European recovery at a time when central banks are planning the withdrawal of monetary support have also pulled investors out of equities.
The Euro STOXX 50 volatility index, Europe’s main gauge of stock market anxiety, touched its highest level in almost seven weeks.
“One-off events or company-related headline news, such as with Telecom Italia yesterday, cannot last for too long, or overshadow concern around increasing COVID cases, new lockdown measures, and growth in European economies,” said Charalambos Pissouros, head of research at JFD Group.
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