Europe close: UK Covid curb extension sends shares into the red

European shares slid into the red at the close on Wednesday, ending a five-day run of gains as tougher Covid-19 restrictions in the UK hit sentiment, despite a new vaccine approval for AstraZeneca.

Having made narrow gains during the day in thin trading volumes, the pan-European Stoxx 600 index finished 0.35% lower, with the UK FTSE 100 down 0.76% and Germany’s DAX 0.31% lower. US markets were stronger at the opening as the Dow Dow Jones gained 160 points.

Shares in AstraZeneca fell 0.82% having been up 3.3% earlier in the session. The company on Wednesday said the UK Medicines and Healthcare products Regulatory Agency (MHRA) has provided authorisation for emergency supply of its Covid-19 vaccine, developed with Oxford University.

Investor fear was driven by news that almost 80% of the UK would now be under the highest form of restrictions - known as Tier 4 - as the number of new cases now started to pass levels seen in April.

"Unfortunately it appears to be the case of a buy-the-rumour, sell-the-fact scenario. Despite allaying fears of a no-deal scenario, we are instead facing up to the fact that the UK is facing months of economic instability," said IG analyst Josh Mahoney.

"With the government shifting a further 20m people into Tier 4 tomorrow, 78% of the country will be operating under restrictions that severely hinder economic activity. With a record 53,000 new cases yesterday, the UK remains on a sharp upward trajectory with no sign of turning the corner."

"The fear is that without a swift reversal in cases, there is a strong chance that the government either lengthens or tightens restrictions further."

Coronavirus concerns overshadowed the UK parliament approving the Brexit trade deal, with the significant legislation receiving only five hours of debating time.

It also took the shine off the AstraZeneca vaccine approval. Unlike the Pfizer/BionTech vaccine, which was approved at the start of December and needs to be stored at -70C, the latest drug can be stored, transported and handled at normal refrigerated conditions for at least six months, making the rollout much simpler.

The pharmaceuticals company said clinical trials had shown that administration of two doses with an interval of between four and 12 weeks was safe and effective at preventing symptomatic Covid-19, with no severe cases and no hospitalisations more than 14 days after the second dose.

AstraZeneca is aiming to supply millions of doses in the first quarter as part of an agreement with the government to supply up to 100m in total.