Europe close: Stocks slip as rising Covid-19 infections drag on sentiment

European stocks finished lower on Monday as investors fretted over rising coronavirus cases across the Continent and mainland China and the prospect of tougher curbs hitting economies.

The pan-European STOXX 600 index fell 0.67% to 408.41. Germany’s DAX was down 0.80% at 13,936.66, albeit after hitting record highs during the previous week.

Earlier, Germany reported an increase in coronavirus cases and tougher lockdown measures in response.

London's FTSE was down 1.09% as Downing Street also considered stricter measures in an effort to curb the spread of the virus driven by a UK variant of Covid-19 and an unwillingness by Britons to obey lockdown rules,

"The threat of increased economic restrictions over the coming months has dealt a blow to market sentiment today, with a stronger dollar and rising Chinese Covid cases sending UK listed miners lower," commented IG analyst Josh Mahony.

"Despite an intensifying vaccination programme that has seen the UK vaccinate over 2.4 million individuals, the fear of an extended lockdown is hurting UK-focused stocks."

Mahony added that the previous Friday's US payrolls report "underscored the challenges facing the new Biden administration when it comes to supporting the US economy" after the loss of 140k jobs in December.

"As a result, it sets us up for a huge fight in the Senate in respect of how big any new fiscal stimulus plan is likely to be when Biden takes up the reins of power...and while they are expected to be more expansive than Republican plans, there is no guarantee they will be anywhere near as large as outlined in the Democrats $3.4trn manifesto, from last year.

"This is because, despite the Democrats regaining nominal control of the Senate, not all in the party are fiscal doves, with some leaning towards the hawkish side.

In equity news, Signature Aviation soared to top the gainers surged after Gatwick Airport co-owner Global Infrastructure Partners has swooped to buy the company for $4.63bn (£3.43bn), beating a rival offer from private equity outfit Blackstone Group and Microsoft founder Bill Gates.

Sanofi rose 0.7% after the French drugmaker bought Kymab, a British clinical-stage biopharmaceutical company for an upfront payment of $1.1bn.

JD Sports rallied after the company said it was confident headline pre-tax profit for the year to January 30 will be "significantly" ahead of current market expectations of around £295m as demand has remained robust throughout the second half.