Europe open: Stocks drop amid risk of second pandemic wave

Stocks in Europe are trading sharply 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 will continue to exert on economies.

Against that backdrop, recent spikes in the number of infections in various European countries, not least in Germany, where hundreds of new cases had been reported, were weighing on investor sentiment.

So too was a warning overnight from the US government's top infectious disease expert, Dr. Anthony Fauci, who labelled the rising number of cases in some US states "disturbing".

Nonetheless, Fauci did express cautious optimism that a vaccine against the novel coronavirus might be ready towards the end of 2020 or start of 2021.

Against that backdrop, as of 1030 BST the benchmark Stoxx 600 was falling by 2.27% to 12,238.81, alongside a drop of 2.07% to 4,914.03 for the French Cac-40 while the FTSE Mibtel was down 1.6% at 19,524.73.

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.

The latest batch of economic data did yield some positive surprises but economists were quick to also underline 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.