European stocks retreat from record high on concerns over hard Brexit

European stocks on Tuesday edged back from record levels, over concerns about the prospect of a so-called hard Brexit.

After reaching an all-time record on Monday, the Stoxx Europe 600 SXXP, -0.80% fell 0.52% to 415.58.

U.K. newspapers reported freshly elected Prime Minister Boris Johnson will introduce a legal provision to bar an extension of trade negotiations beyond a year. Analysts say it will be difficult to complete a U.K.-European Union trade deal in a year.

The German DAX DAX, -0.92% fell 0.38% to 13356.99 and the French CAC 40 PX1, -0.57% dropped 0.32% to 5972.66.

The U.K. FTSE 100 UKX, -0.15% inched up 0.07% to 7524.22, helped by a retreat in the British pound GBPUSD, -0.9299%. Since the major multinationals generate most of their revenue outside the U.K., they tend to benefit when sterling weakens.

The Royal Bank of Scotland RBS, -4.10%RBS, +2.20% and Virgin Money U.K. VMUK, -4.41% both dropped over 4% as investment bank Citi downgraded the lenders to neutral from buy, arguing there is no longer sufficient upside after the big rally on the Conservatives winning the re-election.

Lloyds Banking Group LLOY, -5.16%LYG, +4.39% was the worst performing of the U.K. banks, dropping 5%. Citi said the stress-test results released by the Bank of England on Monday night suggest it may need to increase its capital buffer.

Unilever ULVR, -5.25%UL, +1.59%, the Anglo-Dutch household products giant, dropped 5% as the maker of Hellmann’s mayonnaise and Dove soap said a measure of sales growth will miss forecasts.

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