Europe midday: Shares extend losses after weak PMI readings

European shares extended losses as fears of extended Covid travel curbs on the continent, downbeat UK retail sales and weak business survey readings all hit sentiment.

The pan-European STOXX 600 index was down 1.1% at midday GMT with all major bourses in the red. Travel stocks were out of favour as the UK pondered a total travel ban and the European Union proposed to label hotspots of COVID-19 infections as “dark red” zones, with passengers from those areas forced to take a test before departure and undergo quarantine.

Holiday group TUI slumped 15.3%, easyJet 4.73%, Trainline 4.82%, while Lufthansa and Air France also fell.

In the UK, Prime Minister Boris Johnson, who predicted the coronavirus would be brought under control by last Easter was notably subdued on Thursday about when restrictions could be lifted.

"The optimism of earlier in the week has evaporated, and indices across Europe are suffering losses this morning," said IG analyst Chis Beauchamp.

"Weaker services PMI readings and the prospect of a total UK travel ban have seen the leisure and travel sectors hit, as the outlook for the global economy continues to darken. Optimism about the way ahead has diminished as concerns grow regarding the potential for virus mutations to derail vaccination programmes and put reopening plans back by several months."

Eurozone business activity fell faster in January as companies were affected by the Covid-19 crisis and tightening restrictions.

The flash IHS Markit composite purchasing managers' index dropped to 47.5 from 49.1 a month earlier - the third month in a row with a score of less than 50 which divided growth from contraction. December's score was broadly in line with the consensus forecast of 47.6 and made a further recession in the eurozone likely.

US futures continued to lose ground, with the Dow Jones tipped to open 270 points lower.

"Continued lockdowns will mean that a rebound across the economy seems unlikely for the time being, putting more pressure on both the UK government and the Bank of England to find new ways to provide support for the economy," Beauchamp said.

UK retail sales figures for December increased a worse-than-expected 0.3% against the 1.4% forecast, alongside a downwards revision to November’s figure, from -3.8% to -4.1%. Overall retail sales marked their worst year since records began.

Public sector net borrowing revealed a rise, taking Britain’s national debt above £2trn for the first time.