The sell-off in European stocks lengthened into the afternoon on Monday as investors digested the latest coronavirus caseloads on what has been dubbed 'freedom day' in England.
On Monday, England moved to its final stage of relaxing coronavirus restrictions, despite concern from scientists about mounting caseloads and the faster-spreading Delta variant of the virus becoming the dominant strain.
Investor confidence has taken a knock despite 'freedom day'.
"Investors’ confidence in the UK has dropped by 5% in July, when compared to June, a steeper fall than the 2% registered on average for regions around the globe," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
"The sharply rising Covid infection rates across the country, and concerns about fresh easing of restrictions, is likely to be behind the drop, which is identified in the HL monthly investor confidence survey."
Prime minister Boris Johnson, chancellor Rishi Sunak and the new health secretary Sajid Javid are all self-isolating amid what is being called a 'pingdemic' — a proliferation of notifications telling people to self-isolate due to having been in contact with someone who has tested positive for COVID.
Meanwhile, nightclubs can reopen for the first time since March 2020 with capacity limits are lifted for all venues and events.
“Many of the stocks leading the UK stock market downwards are related to travel and leisure, suggesting that investors are extremely worried that we’ve lifted restrictions too soon and that another lockdown could be a month or two round the corner," said Russ Mould, investment director at AJ Bell.
“Covid is spreading fast again and the airlines, restaurants and leisure companies may not get the strong summer trading they’ve long hoped for. The fact Cineworld is down 8%, Carnival falling 7% and Restaurant Group 4% implies that investors think the reopening trade is now a dud."
US stocks opened lower following declines in Europe.
Watch: England eases COVID-19 restrictions amid rising cases
"Basically, the stock market and its players are addicted to stimulus, and the fact that there will be no new stimulus coming, it is taking some steam out of the current stock market rally," said Naeem Aslam, chief market analyst at AvaTrade.
"In fact, traders are concerned that the help which was provided during the pandemic may began to roll back as global economy continues to recover and this has made investors lose their appetite for riskier assets."
Investors attention turned from economic recovery to risk factors such as inflation and rising COVID caseloads.
Watch: 'Freedom day' in England? Not for Boris Johnson