European Stocks Hit As UK Reimposes Virus Quarantine

European stocks slumped on Friday at the end of a largely positive week for global equities

dragged down by fears of a second wave of coronavirus cases and the stalemate in Washington over a new stimulus package for the US economy.

London's benchmark FTSE 100 index finished the day down 1.6 percent after the British government reimposed a quarantine for travellers from France and the Netherlands, prompting Paris to promise a "reciprocal measure."

The Paris CAC 40 index also retreated 1.6 percent and Frankfurt's DAX 30 shed 0.7 percent.

Wall Street stocks had an uneventful day, finishing a positive week little changed. Markets have largely shrugged off Washington's inability to make progress on another stimulus bill, despite a bad coronavirus outbreak in the United States that continues to cloud the economic outlook.

In Europe, rising COVID-19 cases in some areas have prompted fresh restrictions.

In addition to Britain's quarantine, Germany put all of Spain except on its quarantine list except for the Canary Islands.

Spain, for its part, closed nightclubs and banned smoking and drinking in the streets to try to stem a rise in infections.

"If European governments were hoping to salvage something tangible from the 2020 summer holiday season these recent setbacks are unlikely to help," said Michael Hewson, chief market analyst at CMC Markets UK.

Shares in British Airways parent IAG tumbled 4.8 percent.

The updated quarantine "is sadly yet another blow for British holidaymakers and cannot fail to have an impact on an already troubled aviation industry," IAG said in a statement.

The UK government said the change would kick in Saturday at 0300 GMT, sparking an exodus among the estimated 160,000 British holidaymakers in France after a rise in coronavirus cases there.

Back in the US, economic data continued to point to a sluggish recovery.

Industrial production rose 3.0 percent in July, the third consecutive monthly increase but a slower gain than in June, the Federal Reserve said.

Despite the mediocre data and broad expectations that unemployment will remain at high levels for some time as the US struggles to contain the coronavirus, the S&P 500 and Nasdaq stand near all-time highs.

"The recovery in equity markets has been stunning, partly reflecting the huge amount of stimulus that has been unleashed," said a note in Oxford Economics.

"However, a further deterioration in the health situation or the absence of additional fiscal support are two key downside risks that are likely not fully discounted."