* Stocks tumble two percent as COVID-19 curbs gather pace
* Little sign of breakthrough in UK-EU trade talks
* Hopes for pre-election U.S. fiscal package fizzle out (Updates throughout)
LONDON, Oct 15 (Reuters) – European shares hit two-week lows on Thursday, knocked by tougher curbs in London and Paris to fight a second wave of the COVID-19 pandemic, with no breakthrough in Brexit trade talks also a dampener.
Wall Street was also set to add to losses from previous sessions as policymakers in the United States fail to agree on an economic stimulus package ahead of presidential elections next month.
Analysts said the biggest pullback in markets in three weeks was more of a pause than a fundamental shift, however.
“We have to be careful about reading too much into these moves ahead of the U.S. election coming up,” said Ned Rumpeltin, European Head of Currency Strategy at TD Securities
“There is a general risk-off sort of feel for the day. I don’t really see today in terms of changes in overall trends and direction.”
Europe’s leading stock indices all fell by two percent or more, taking their queue from weaker markets in Asia overnight, and a Wall Street pulled lower on Tuesday as the earnings season gathered momentum.
Financials Morgan Stanley and Schwab report on Thursday, and markets will also take stock of the latest U.S. jobless claims figures.
Analysts said the rise in coronavirus infections across Europe and no sign of a vaccine anytime soon after two high-profile prospects experienced problems was hitting sentiment.
London was headed for a tighter lockdown, with France also introducing tighter curbs in Paris and other major cities.
Hopes for a U.S. package to boost the coronavirus-hit economy before the presidential election next month have also fizzled out after U.S. Treasury Secretary Steven Mnuchin said such a deal would be difficult.
“It’s all pointing to a greater hit to fourth quarter activity and warrants a degree of adjustment in market pricing,” said Derek Halpenny, head of research at MUFG.
The pan-European STOXX 600 was down 2.1% to a near two-week low, with markets in London and Paris lower 2%-2.2% and Frankfurt and Milan 2.6%-2.7% weaker.
BREXIT ON EU SUMMIT MENU
A two-day summit of European Union leaders starts on Thursday as the EU and Britain continue their efforts to overcome stumbling blocks, such as fishing rights and competition safeguards, to agreeing a trade deal before the UK’s Brexit transition arrangements end on Dec. 31.
The pound slipped 0.4% to $1.2950 whereas the euro drooped 0.25% against the dollar to $1.1716, its lowest in a week.
Investors will tune into European Central Bank President Christine Lagarde, who takes part in a debate on the global economy at 1600 GMT as part of the IMF and World Bank’s annual meeting which is being held virtually.
In Asia, MSCI’s broadest index of Asia-Pacific shares lost 1.3% with Hong Kong and India both down over 2% and Japan’s Nikkei closing down 0.5%.
U.S. S&P 500 futures were pointing to a 0.6% drop while the Nasdaq equivalent sank 1.2%. On Wednesday, the S&P 500 closed down 0.7% and the Nasdaq Composite Index shed 0.8%.
With traders seeking safety again, Germany’s government bonds rallied to leave their yields at their lowest level since the March spread of COVID-19 caused the global meltdown in stock markets and other riskier assets..
Oil prices also fell as the renewed surge in the virus in large parts of the world underpinned concerns about economic activity.
Brent crude futures dropped 2.3% to $42.31 a barrel, U.S. West Texas Intermediate (WTI) crude futures dropped back to $39.97 a barrel while gold and industrial metals like copper were broadly flat.
Additional reporting by Suzanne Barlyn in New York; Editing by Jacqueline Wong, Gareth Jones and Chizu Nomiyama