Europe close: Stocks mostly lower, China reopening in focus

European shares were mostly lower in muted trade as Italian authorities said they would begin testing all arriving passengers from China as that country's authorities barreled forward with plans to reopen the economy.

Amid international concern around the risk of new Covid-19 variants appearing, German authorities also reportedly said they were monitoring the situation although no new variants had been discovered yet.

The benchmark Stoxx 600 index slipped 0.13% to 427.46 despite a weaker session in Asia aside from Hong Kong, where investors reacted positively to news that vaccine proofs and testing requirements would soon be eliminated.

In parallel, the yield on the benchmark 10-year German Bund was 11 basis points higher to 2.497% and just off its 2022 high of 2.534% and euro/dollar was drifting lower to 1.0625.

Trade on the London Stock Exchange resumed after the long holiday break and made a positive start with the top-flight index edging up 0.3%.

"The UK index could end the year in positive territory despite the broad pressures on global equity markets, weighed down by rising interest rates, inflation, and the threat of recession," said Victoria Scholar, head of investment at Interactive Investor.

Miners were a bright spot driven by hopes of a recovery in China, which on Monday further eased its tough Covid restrictions. Antofagasta shares were up on the news.

Some financial firms with a China focus, such as HSBC gained, but that was not the case for insurer Prudential.

In other equity news, Wizz Air and easyJet flew lower after Italy’s competition regulator has launched an inquiry into potential price-fixing of flights to and from Sicily.

Consumer group Codacons filed a complaint about prices on the route. Ryanair, Wizz Air and easyJet are among the airlines potentially involved as well as state-owned ITA Airways.