Early momentum for European equities stalled due to travel restrictions and lower oil prices even as many countries across the continent moved to relax their government-imposed coronavirus lockdowns.
The FTSE 100 was down 0.3 per cent, after it gained as much as 1 per cent in early trading to approach the 6,000 mark, which it last broke at the end of April.
Germany’s Dax reversed its early gains to fall 0.3 per cent, after opening 0.7 per cent higher. The lowest Covid-19 mortality rates since March reported in Italy, France and the UK over the weekend and steps taken by governments to restart economic activity were insufficient to sustain investors’ optimism.
Travel and energy stocks dropped as the UK plans to put a 14-day quarantine requirement in place for the majority of arrivals to the country and oil prices slipped.
London Heathrow Airport, which on Monday reported a 97 per cent drop in passenger traffic in April, said 200,000 people passed through its terminals for the month, the same number that it would typically serve in a day.
“Aviation is the lifeblood of this country’s economy and, until we get Britain flying again, UK business will be stuck in third gear,” said John Holland-Kaye, chief executive of the airport group.
Brent crude, the international benchmark, was down 3.2 per cent at $29.98 a barrel and West Texas Intermediate, the US marker, fell 3.5 per cent to $23.87.
“The recovery is well under way, but it will not be plain sailing,” said Tamas Varga, an oil analyst at broker PVM. “Headwinds will emerge at the different stages in the future.”
Those headwinds include downbeat economic data, government bailouts for bad businesses, the scale of oil stockpiles and compliance with Opec output cuts as producer nations need to pay off dollar debt while the US currency strengthens, he added.
New virus outbreaks in South Korea, Germany and China have highlighted the challenges faced by governments seeking to loosen social restrictions, as millions of Europeans prepare for the tentative reopening of their economies.
Patrik Schowitz, global multi-asset strategist at JPMorgan Asset Management, said investors would need to see evidence that corporate earnings had hit a trough in order to be convinced that stock markets would not re-test the lows reached in March.
“To gain confidence in a bear market low, equity investors traditionally need some visibility into the scale of a recession’s damage to corporate profits,” Mr Schowitz said.
Futures for the S&P 500 pointed to losses when the US opens of 0.4 per cent, after closing higher on Friday despite grim unemployment data.
In Asia-Pacific trading, Japan’s benchmark Topix index and Hong Kong’s Hang Seng were up 1.5 per cent.
Investor sentiment was bolstered by the weekend announcement from the People’s Bank of China that it would lower real lending rates and “place support for [the] recovery of the real economy in a position of greater priority”.
The CSI 300 index was down 0.1 per cent as Wuhan, the original centre of the outbreak in China, has reported its first clutch of cases since a strict lockdown on the city was lifted about a month ago.
Equities have been buoyed in recent weeks by hopes that a gradual restart in global economic activity could fuel a broad rebound. The UK, France, Spain, Denmark and Norway are all set to lift some measures to ease the economic impact of the pandemic.
That optimism has allowed investors to brush off some of the most dismal economic readings on record. On Friday, the S&P 500 rose 1.7 per cent even as the US unemployment rate surged to a postwar high of 14.7 per cent