Europe midday: Stocks drop amid rising Covid-19 infections, trade frictions

Stocks in Europe remain lower as investors assess the risks around a possible second wave of Covid-19 infections around the globe and the dampening effect - or not - that it will continue to exert on economies.

On top of a recent rash of Covid-19 outbreaks in multiple European countries, record rates of infection in various US states led Pantheon Macroeconomics to predict that the daily tally in the States could hit 100,000 by 10 July.

Not surprisingly, overnight the US government's top infectious disease expert, Anthony Fauci, labelled the rising number of cases in the States "disturbing".

Against that backdrop, as of 1239 BST the benchmark Stoxx 600 was falling by 1.46% to 12,314.16, alongside a drop of 1.59% to 4,938.03 for the French Cac-40 while the FTSE Mibtel was down 1.43% at 19,556.63.

David Madden at CMC Markets UK highlighted the impact of Fauci's comments on markets, but argued that Wednesday's losses had to be put in perspective given the recent rebound in stocks back towards multi-month highs.

"Today has been fairly quiet in terms of news, so the health crisis is basically the only story in town," Madden said.

Also weighing on sentiment was news that the US was mulling tariffs on $3.1bn of exports from the European Union.

According to some market commentary, the aim was to forestall EU retaliation for earlier levies that had been approved by the World Trade Organisation.

Morgan Stanley nonetheless wrote the day before that EU retaliation was unlikely so as to avoid a further headwind for the Continent's still struggling recovery.

The latest batch of economic data did yield some positive surprises but economists were quick to highlight how it also underscored the depth of the current downturn.

The closely-followed German business confidence index from the country's IFO institute rose from May's level of 79.7 to 86.2 (consensus: 85.0).

In France meanwhile, INSEE reported that its business confidence gauge rebounded from 60 points for May to 78 in June (consensus: 72.0).

Nevertheless, the IFO index had still only recovered half its losses since the start of the pandemic and the French gauge remained well-below its long-run average of approximately 100.0.