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European stocks slumped in October as virus spikes led to tighter curbs

European stocks in October declined the most since March and underperformed their U.S. and Asian counterparts as tighter COVID-19 curbs in the western continent threatened to derail the economic recovery.

The S&P Europe 350 index, which tracks equities from 16 developed markets in the region, declined 5.14% in October after September's 1.52% drop.

The index reversed gains from earlier in the month as market volatility surged toward the end of October in reaction to new lockdowns, including national-level curbs in Spain, France, Germany and Italy, according to a J.P.Morgan Asset Management note.

The S&P 500 finished October 2.8% lower, while the MSCI AC Asia Pacific All Cap Index gained 0.65%. Emerging market equities also performed better than European stocks, with the MSCI Emerging Markets Index rising 3.4% on the month.

Uncertainty over the U.S. presidential election has also weighed on markets as traders assessed the implications of a potential victory by Democratic candidate Joe Biden over President Donald Trump. The European index's loss this year through the end of October grew to 18.92% from 14.53% a month ago.

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Germany's DAX, one of the biggest losers in October, slumped 9.44% following the announcement of a monthlong partial lockdown Oct. 28, which took effect Nov. 2.

France's CAC 40 lost 4.4% in October. A second lockdown in France began Oct. 30. Italy's FTSE MIB and Spain's Madrid Ibex 35 fell 5.64% and nearly 4%, respectively.

"European equity performance has lagged on risks of renewed activity setbacks as virus cases rise, relatively poor economic performance and investors' aversion to value-oriented exposures," BlackRock Investment Institute said in its Oct. 27 global outlook update.

The U.K.'s FTSE 100 fell 4.92%, the steepest monthly drop since March, as Prime Minister Boris Johnson on Oct. 31 announced a partial lockdown that took effect Nov. 5.

The Ireland ISEQ 20 edged up 0.67%, marking the only index of the 19 tracked by S&P Global Market Intelligence to log gains in October.

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BlackRock on Nov. 2 downgraded European equities to neutral from overweight, saying the renewed restrictions are putting pressure on economic activity in the region.

The eurozone saw its biggest expansion on record in the third quarter, with GDP growing 12.7% quarter over quarter following an 11.8% contraction in the second quarter. The European Union economy expanded 12.1% in the third quarter.

However, the economic recovery in the eurozone "is off the table for now," with a GDP drop in the fourth quarter now the most probable scenario, RaboResearch economists wrote in an Oct. 30 note.

Meanwhile, Brexit remained a further headwind, as negotiations between Brussels and London continued to drag on.