European stock markets tanked Thursday, after steep losses elsewhere, as investor sentiment was hammered by fears that tightening coronavirus restrictions could derail the world's tentative economic recovery.

London equities sank 1.9% around midday after the UK government announced that the British capital will face more stringent coronavirus restrictions because of a rising number of cases.

Paris dropped 2.2% after the French government imposed a curfew in its capital and eight other cities - covering almost a third of the country's population - for as long as six weeks.

And Frankfurt stocks dived 2.7% after Germany also ramped up Covid-19 restrictions.

"Renewed health concerns and tighter restrictions around Europe are hammering stocks," said CMC Markets analyst David Madden.

"Dealers are dumping stocks for fear that economic activity will drop off because of the tighter restrictions in various parts of Europe."

The pound meanwhile struggled ahead of a European Union summit where leaders will discuss post-Brexit trade talks, with Prime Minister Boris Johnson urging them to give ground or see Britain walk away with no deal.

Oil prices also faltered, losing more than two percent.

'Far apart' on stimulus

Investors tracked another sell-off in New York after US Treasury Secretary Steven Mnuchin warned that Republicans and Democrats were still "far apart" on a stimulus package before next month's presidential and congressional elections.

However, analysts said traders were taking comfort from the possibility that Joe Biden and the Democrats will win the presidency and both houses of Congress, paving the way for a bigger stimulus than anything that could be agreed before the vote.

Adding to the downbeat mood on trading floors is the surge in coronavirus infections in Europe, which is forcing governments to revert to tough containment measures that observers fear could deliver a blow to a tentative recovery from national lockdowns earlier this year.

The crisis comes after hopes for a vaccine were hit by news that Johnson & Johnson had halted advanced trials after a volunteer fell ill, while Eli Lilly paused work on a treatment.

"The European Covid situation has been deteriorating again this week and more and more countries are introducing strict containment measures," said Gorilla Trades strategist Ken Berman.

In Asia, Tokyo suffered steep losses, while Mumbai, Taipei, Manila and Wellington were also in the red.

Singapore and Hong Kong were both well down, with little reaction from news that the two cities' governments were pushing ahead with plans to open a travel bubble in a first for Asia.

Source: News24