European stocks fall 2% as global sell-off, China Covid concerns batter sentiment

LONDON — European stocks were sharply lower on Monday as the sell-off in global markets continues into the new trading week.

The pan-European Stoxx 600 index was down 2% by mid-morning with nearly all sectors in negative territory apart from utilities. Basic resources stocks — with their heavy exposure to China — were the worst performers on the index, with the sector down 5.8%.

The negative trade in Europe comes after Asia-Pacific markets fell sharply on Monday following a sell-off on Wall Street on Friday. Mainland Chinese indexes led losses. The Shenzhen component tumbled around 6%, while the Shanghai composite declined 5.09%.

Asian markets are also being buffeted by concerns over China’s Covid wave as the world’s second-largest economy struggles to contain its worst outbreak of the virus despite harsh lockdowns in its largest city, Shanghai. Over the weekend, Beijing warned that the virus has been spreading undetected for about a week.

Meanwhile, U.S. stock futures fell amid a four-week losing streak for the Dow Jones Industrial Average as investors assessed the likelihood of rising interest rates. Wall Street is also bracing itself for a stacked week of earnings, including reports from major tech companies such as Amazon and Apple.

Investors in Europe are also digesting the result of the French presidential election on Monday, and monitoring the latest developments in Ukraine.

France’s Emmanuel Macron looks set to have comfortably beaten his rival Marine Le Pen in Sunday’s election, securing a second term as president on his pro-business and pro-EU agenda.

Official results showed centrist Macron of the La Republique En Marche party gaining 58.5% in the second and final round of voting. Le Pen of the nationalist and far-right National Rally party had almost 42% of the vote.

European investors continue to monitor developments in Ukraine as Russia’s invasion of the country entered its third month on Sunday. The conflict that has killed thousands and led to the worst refugee crisis Europe has seen since World War II.

The war will end only if Russian troops fully withdraw from the country, Ukrainian Prime Minister Denys Shmyhal said.

Shares of Dutch health technology company Philips were down 10% after the firm reported a steep drop in first-quarter core profit. Meanwhile, shares of Roche were down 1.7% despite the Swiss drugmaker’s sales rising by a better-than-expected 10% in the first quarter.

In other news, Germany’s Ifo Institute reported Monday that sentiment in the German economy has stabilized at a low level.

The ifo Business Climate Index rose to 91.8 points in April, up from 90.8 points in March. This was due primarily to less pessimism in companies’ expectations, Ifo said.

— CNBC’s Silvia Amaro, Sarah Min and Matt Clinch contributed to this market report.