European equities declined in September, finishing the third quarter flat as fears about renewed COVID-19 lockdowns and the uncertain fate of a post-Brexit trade deal dented risk appetite.
The S&P Europe 350 index, which tracks equities from 16 developed markets in the continent, declined 1.52% in September, following a rebound in the previous month. The index's year-to-date loss grew to 14.53% as of Sept. 30 from 13.2% a month ago.
While nationwide lockdowns will likely be avoided, governments could adopt "a more targeted approach" in imposing fresh coronavirus-related curbs, Erik-Jan van Harn, economist at RaboResearch Global Economics and Markets, wrote in a Sept. 15 note.
Besides COVID-19 and Brexit, uncertainty stemming from the U.S. about the presidential election and fiscal stimulus also weighed on market sentiment, Craig Erlam, senior market analyst for the U.K. and Europe, the Middle East and Africa at OANDA, told S&P Global Market Intelligence by email.
In the final month of the third quarter, the FTSE 100 lost 1.33%, driven by a sell-off in major British banks, as U.K. Prime Minister Boris Johnson announced new restrictions applicable in England. Johnson said the average number of individuals testing positive for the virus had quadrupled to about 3,900 per day from about 1,000 a month ago.
Stock indexes of only four of the 19 European economies tracked by S&P Global Market Intelligence advanced in September, with Sweden's OMX Stockholm 30 and Luxembourg's LuxX logging the largest gains of 3.57% and nearly 3%, respectively.
France's CAC 40 and Spain's Madrid Ibex 35 lost 2.91% and 3.63%, respectively, in September, as France and Madrid announced fresh measures to contain the spread of the virus.
Another major market in the bloc — Germany's DAX — lost 1.43%.
Encouraging signs on a COVID-19 vaccine would help revive risk appetite, and so would a Brexit trade deal and further U.S. stimulus, Erlam said.
The S&P Europe 350 Information Technology index fell 1.21% in September, but was 4.21% higher on the quarter.
Amundi is now "less negative" on tech stocks in Europe, while the French asset management firm holds a neutral view of financial equities.