Europe open: Stocks skid lower amid worries over second wave, Brexit

Stockmarkets across Europe are set to start the week lower on the back of concerns of a second wave of the novel coronavirus epidemic and around Brexit.

News of a fresh outbreak of Covid-19 in Beijing and of a pick-up in cases in 20 US states triggered selling in Asian equities overnight and were weighing on investment sentiment, echoing the worries that led to a sharp drop in markets last Thursday.

So too was Cabinet Minister Michael Gove's announcement, after the close of markets on Friday, that the UK would not seek another extension to the Brexit deadline.

David Bloom, HSBC's global head of foreign exchange strategy told Bloomberg TV that "it’s a U-shape pick-up, and [the recovery] is going to be slow and patchy".

But not all analysts were onboard with that notion, with Morgan Stanley economists led by Chetan Ahya telling clients at the weekend: "We have greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action."

Against that backdrop, as of 0803 BST the benchmark Stoxx 600 was retreating by 2.07% to 346.72, alongside a 2.65% fall on the German Dax to 11,626.20 while the FTSE Mibtel was 2.66% lower at 18,385.88.

In parallel, sterling was 0.30% lower against the euro to 1.1098 while front-dated Brent was down 3.3% to $37.46 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.

Analysts at UniCredit were expecting that he would again threaten to walk away from talks if no significant progress were made by the end of July.

Among the topics that remained to be thrashed out were protection of the so-called 'level playing field' between the UK and other EU countries, governance and fishing quotas.

"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.

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.

Euro area government debt and foreign trade figures were scheduled for release at 0930 and 1000 BST, respectively.

On a more positive note, also the close of markets last Friday, Fitch reaffirmed its long-term rating on Spanish government debt at A- with a 'stable' outlook.

Fitch flagged the country's efforts since the financial crisis to lower corporate and household debt, but noted the fragility of the current government was a risk.

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.