European shares slip as BREXIT, lockdown worries outweigh upbeat earnings

(Reuters) - European stocks fell on Tuesday as worries about coronavirus curbs and BREXIT countered optimism generated by strong earnings, including from Swiss bank UBS and consumer giant Reckitt Benckiser. Italy, Spain and Britain imposed curbs to limit the spread of new coronavirus cases that threaten to derail a budding economic recovery. The latest curbs in Ireland will see GDP fall by 3.5% this year, Finance Minister Paschal Donohoe said.

The pan-region STOXX 600 has recovered about 35% from a pandemic-panic plunge in March, but is struggling to reach pre-crisis levels, plateauing as the second-wave of the disease grips. On Tuesday, the index closed down 0.35%.

Meanwhile, the European Union and Britain struggled to make progress on a trade deal to avoid a fast-approaching disruptive finale to the five-year drama of Britain's departure from the EU.

"Both sides realistically have until the middle of November (to strike a deal). That means there is still time for things to go wrong, and the risk of there being no deal, or only a wafer-thin agreement, are uncomfortably high," said Timme Spakman, economist, international trade analysis at ING.

"The economic impact of a no-deal BREXIT on the EU economy will be significant... The automotive industry, agriculture and chemical sectors <.SX4P> stand to be the most affected."

Earnings were a bright spot. UBS rose 2.7% as it posted a 99% jump in quarterly profit, while computer peripherals maker Logitech International gained 16% after it raised its full-year forecast.

Robust demand in the United States and China helped cognac maker Remy Cointreau post a broader recovery in second-quarter sales, but its shares slipped 2.4% with some analysts saying it may have been priced in.

Swedish telecoms operator Tele2 fell 4.7% after it stuck to its outlook for roughly unchanged operating profit in 2020.

"What most investors are looking at it is how strong 2021 recovery will be," said Nick Peters, multi-asset portfolio manager at Fidelity International.

Third-quarter profits for companies on STOXX 600 are expected to drop 36.7%, Refinitiv data shows, improving from a 51% plunge in the previous quarter when economic losses from the pandemic peaked.

London's FTSE rose as much as 0.7% before ending flat. Bank of England policymaker Gertjan Vlieghe said the central bank could need to add more stimulus.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Barbara Lewis)

By Sruthi Shankar and Susan Mathew