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The financial district of Canary Wharf

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, -0.68%

dropped 0.72% to 414.76.

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, -0.89%

declined 0.9% to 13286.79 and the French CAC 40

PX1, -0.39%

 fell 0.35% to 5970.92.

The U.K. FTSE 100

UKX, +0.08%

only weakened 0.04% to 7516.10, with losses limited by a retreat in the British pound

GBPUSD, -1.6273%.

Since the major multinationals generate most of their revenue outside the U.K., they tend to benefit when sterling weakens.

Lloyds Banking Group

LLOY, -5.87%

LYG, -7.14%

was the worst performing of the U.K. banks, dropping 5.9%. Citi said the stress-test results released by the Bank of England on Monday night suggest it may need to increase its capital buffer.

Virgin Money U.K.

VMUK, -5.51%

fell 5.5% and the Royal Bank of Scotland

RBS, -2.95%

RBS, -4.02%

 fell 3% as 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.

Unilever

ULVR, -7.16%

UL, -8.95%,

the Anglo-Dutch household products giant, dropped 7% as the maker of Hellmann’s mayonnaise and Dove soap said a measure of sales growth will miss forecasts.

NMC Health

NMC, -32.40%

 collapsed by 32% as Muddy Waters said it was shorting the U.K.-listed, Middle Eastern health-services firm. NMC Health shares slammed as Muddy Waters takes short position

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2019-12-17