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European stocks slide as UK tightens virus quarantine

British Airways down six percent

European stock markets slumped on Friday at the end of a largely positive week for global equities, dragged down by fears of a second wave in coronavirus cases and the stalemate in Washington over a new stimulus package for the US economy. 

Approaching the half-way mark, London’s benchmark FTSE 100 index was down 2.1 percent after the UK government reimposed a quarantine for travellers from France and the Netherlands, prompting Paris to quickly announce a “reciprocal measure”.

The Paris CAC 40 index retreated 2.0 percent and Frankfurt’s DAX 30 shed 1.25 percent.

Asian ended mixed.

“European markets turned south on Friday led by a decline in travel and leisure stocks after the UK added France to its 14-day quarantine list,” noted Neil Wilson, chief market analyst at Markets.com.

“After a decent start to the week it looks like equity markets are finishing off rather meekly.”

Shares in British Airways parent IAG slumped six percent to 192 pence.

The updated quarantine “is sadly yet another blow for British holidaymakers and cannot fail to have an impact on an already troubled aviation industry”, IAG said in a statement.

The UK government said the change would kick in Saturday at 0300 GMT, sparking an exodus among the estimated 160,000 British holidaymakers in France, after a rise in coronavirus cases there.

– US stimulus –

Equities were retreating Friday also over fading hopes of a US stimulus deal being struck — and ahead of key weekend trade talks between the United States and China.

Hopes that Democrats and Republicans would cast aside their mutual animosity to stump up much-needed cash for struggling Americans have been key to supporting equities for weeks.

But they were dealt a blow Thursday when senators broke up for a summer recess, saying they would not return until early next month, while both sides continued to trade accusations over who was to blame for the impasse.

Democrats have called on Republicans and the White House to double their $1-trillion offer, having reduced their own proposal to $2 trillion from an initial $3.5 trillion.

The expectation remains that an agreement will at some point be found, particularly with the US election nearing and millions of Americans in financial crisis.

“Congress’ political grandstanding delay is posing some risk for the global recovery,” said Stephen Innes at AxiCorp. 

In a sign of the battle governments could have in rebooting their economies, data out of China Friday showed consumers were still reluctant to go out spending, with retail sales falling last month despite forecasts of a small increase.

While the drop was shallower than in June, Innes said it showed that it was “going to take more than stimulus and deep discounts on luxury products to get people shopping again”.

At the same time, industrial production continued to grow, suggesting the economy’s recovery is being supported by the manufacturing sector.

Investors will be keeping a close eye on talks at the weekend between China and the US that will review the trade pact signed in January, though expectations are for the deal to be kept in place, despite increasing tensions between Washington and Beijing

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