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European Markets Decline Amid Continued Delta Virus Worries

European shares retreat on continued Delta strain concerns across countries. A surge in cases could prompt broader restrictions that would dent the economic rebound.

SageFX - Jul, 12, 21

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Principal Points

  • European shares retreat on continued Delta strain concerns across countries
  • A surge in cases in Spain, Portugal, and the Netherlands could prompt broader restrictions that would dent the economic rebound

European stocks drifted lower to kickstart the trading week on Monday. Major bourses in Europe slid after hovering right above the flatline in the early hours as investors reflect on concerns that the spread of the Delta variant could derail Europe’s economic expansion.

The rapid spread of the new Covid-19 strain is causing economists to doubt whether the ongoing sharp rebound could be sustained. The lifting of most of the lockdown measures has led to a surge of new infections in certain countries in the bloc.

Spain Registers High Increase in Cases

Germany and France are considering bringing back travel restrictions after on Friday they warned their citizens against travelling to Spain. The Southwestern country recently became number one in Europe in terms of confirmed coronavirus cases on a seven-day basis. Surpassing Portugal, Spain registered the highest coronavirus rate in mainland Europe with the seven-day rate catapulting from 58 cases per 100,000 to 156 last week.

The Netherlands informed its citizens it will move to reintroduce restrictions on social activities, including eating out in restaurants, bars, cafes and attending live events. The drastic measures come only two weeks after lifting almost all restrictions and are aimed to curb an almost tenfold increase in daily infection rates to 7,000 in that period.

“Such a high number of infectious people can be a risk for people who have not, or not yet, been fully vaccinated,” the government of the Netherlands said in a statement released on Friday. “The Delta variant is causing more cases of illness among people who are not fully vaccinated, and there have even been cases of this variant infecting people who are fully vaccinated or who have already had a coronavirus infection,” it continued. The statement also said that the restrictions are likely to remain in place at least until the end of the summer. The European Centre for Disease Prevention and Control announced that the weekly coronavirus infection rate for the European Union had risen to 51.6 per 100,000 people. The number is up from 38.6 in the week prior. Based on the increasing trends, the report forecasts that cases could reach 91.5 per 100,000 in the next four weeks.

The alarming increase in Delta virus cases is threatening to undermine the most rapid expansion since the late 70s. The brightening economic outlook, according to economists, could quickly darken if regional restrictions are reimposed. Last week, the European Commission revised upward its growth forecast to 4.8% in 2021, a prediction that could only be met if social and business activities continue to flourish across the continent.

The rapid vaccination progress, however, is fueling hopes countries will consider it unlikely to have to reintroduce serious lockdown measures and economic restrictions. According to official data, at least 63.3% of the adult EU population has received at least one dose of a coronavirus vaccine.