Europe close: Stocks down amid inflation worries, Travel and Leisure hardest hit

European shares fell back on Tuesday, tracking continued selling on Wall Street amid concern over rising US inflation and what some analysts said was fairly indiscriminate selling.

"The market just can’t shake the inflation fears which are clouding the recovery from Covid,” said AJ Bell investment director Russ Mould.

"Surging commodity prices are acting as a canary in the coal mine for inflation – with the huge infrastructure and stimulus packages in the US a key contributing factor. The valuations of the tech-based growth companies in the US are harder to justify in an inflationary and rising interest rate environment – where lower risk assets typically offer higher returns."

The pan-European Stoxx 600 index finished down 1.97% at 436.61, alongside a 1.82% drop for Germany's Dax to 15,119.75.

Italy's FTSE Mibtel meanwhile fell 1.64% to 24,396.01.

The Stoxx 600 sector gauge for Travel and Leisure names plummeted 5.73%, with some traders noting that even high-flying Basic Resources shares were also caught in the downdraft, with that sector index down 1.52%.

Losses in Travel and Leisure came even as the UK's chief medical officer, Chris Witty, said of the new "highly transmissible" variant of Covid-19 detected in India: "at this point in time, our view is it is less likely to be able to escape vaccination than some of the other variants."

The day before, the World Health Organisation had labelled that variant as another of "global concern".

In the background, the yield on the benchmark 10-year Bund was five basis points higher at -0.16%.

Stateside, analysts were watching five-year inflation breakevens on US Treasuries, which at 2.71% were already at multi-year highs.

In other equity news, Sweden's Evolution Gaming Group led the fallers, down 14% after the bookrunner announced the pricing of block trades.

UK bank NatWest slipped after the government kicked off the sale of a further stake in the bank.

Supermarket Morrisons shares initially bucked the trend as it reported a rise in first-quarter sales and reiterated guidance for higher full-year profits and reduced debt as the economy rebounded from the Covid-19 pandemic - but later fell back.