Europe stocks slide as lockdowns loom; bonds gain

European stocks fell with U.S. equity futures as investors weighed the impact of economic lockdowns amid a brutal fourth wave of the pandemic in Europe. The euro extended a decline and bonds rose.

European stocks fell with U.S. equity futures as investors weighed the impact of economic lockdowns amid a brutal fourth wave of the pandemic in Europe. The euro extended a decline and bonds rose.

The Stoxx Europe 600 index tumbled after Germany’s health minister said he couldn’t rule out a lockdown as infections surge relentlessly in the region’s largest economy. Austria earlier announced a nationwide lockdown from Monday. Nasdaq 100 contracts held a gain after the underlying gauge helped propel Wall Street to another record high Thursday. Contracts on the S&P 500 slipped.

Global stocks continue to hover near records, propped up by robust U.S. corporate earnings growth. Many major asset managers expect markets to continue climbing into next year, albeit at a less enthusiastic and more volatile pace, as inflationary pressures gradually ease. A resurgence of the pandemic, however, could stall the economic recovery.

“Some factors will cap the expected returns for both equity and bonds in 2022,” according to Luca Paolini, chief strategist at Pictet Asset Management. “Record valuation, tighter monetary and fiscal policy and the surge in inflation will keep the pressure on, resulting in single-digit returns for equities.”

Yields on government bonds across the region sank, with those on German bunds falling to the lowest in two months. Treasury yields dropped five basis points to trade around 1.5 per cent. Brent crude fell below US$80 after earlier adding as much as 1.2 per cent. A gauge of the dollar traded near the highest in more than a year.