Europe close: Stocks pare early losses to end only slightly lower

Europe's main stockmarkets finished the session mostly lower but well off their worst levels, managing to recover from early selling triggered by news of a fresh Covid-19 outbreak in Beijing and around Brexit.

The news from China was on top of the ongoing pick-up in cases in 20 US states and had resulted in sharp selling in Asian equities overnight and came just as many European Union countries, including Austria, Germany, and Switzerland were lifting travel restrictions within the bloc .

Yet some analysts were quick to point out how past outbreaks in China had been dealt with quickly with only "limited" economic disruption.

Also helping sentiment was the release on Monday afternoon of a much stronger reading on factory sector conditions in the New York state area.

By the end of trading, the benchmark Stoxx 600 was down by only 0.27% to 353.09, alongside a 0.32% fall on the German Dax to 11,911.35.

The FTSE Mibtel on the other hand was ahead by 0.41% at 18,969.29.

On the situation in the US, Jim Reid at Deutsche Bank was cautious, especially given that new Covid-19 cases over the weekend were still concentrated in California, Texas, Florida and Arizona.

Those first three states, the biggest in the country, reported 16,500 new cases or about 37% of the total increase and Jim Reid said "it is a worry that cases continue to rise nearly 3 months into the pandemic".

International trade not far from investors' minds

Sterling also fought back after Cabinet minister, Michael Gove, tweeted on Friday that the UK would not seek another extension to the Brexit deadline, which had served to send the pound duly lower.

The pound ended the day 0.16% lower against the euro to 1.1124, while front-dated Brent was up 2.2% at $39.58 a barrel on ICE.

UK Prime Minister, Boris Johnson, was due to speak with the heads of the European Commission, European Council and European Parliament later on Monday to discuss trade talks.

"A breakthrough seems unlikely until later this year. Last Friday, the UK formally announced that it would not be extending the transition period," UniCredit said.

Speaking of trade, the latest data from Eurostat showed that the euro area's foreign trade surplus was wiped out in April as export growth collapsed.

The surplus shrank from an upwardly revised €25.5bn in March to just €1.2bn for April.

Against that backdrop, Chinese data released overnight meanwhile showed fixed asset investment, industrial production and retail sales were all running below forecasts in May, leaving economists somewhat divided on the outlook, further dampening investor sentiment.

Looking out to the remainder of the week, investors were waiting on interest rate decisions from the Bank of Japan, Swiss National Bank, Norges Bank, Bank of England and Central Bank of Russia.