European stocks end lower as risk rally winds down

The pan-European STOXX 600 edged 0.3 per cent lower, still staying close to a 10-month high. — Reuters pic
The pan-European STOXX 600 edged 0.3 per cent lower, still staying close to a 10-month high. — Reuters pic

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FRANKFURT, Dec 31 ― European stocks ended a five-day winning streak yesterday as investors locked in recent gains, although positive vaccine and Brexit trends pointed to a stronger 2021 for regional markets.

The pan-European STOXX 600 edged 0.3 per cent lower, still staying close to a 10-month high. The index is set to shed more than 3 per cent this year, owing to disruptions caused by a second wave of coronavirus infections towards the end of the year.

But the signing of a Brexit deal, coupled with the rollout of a vaccine programme has made investors optimistic about a recovery in 2021.

“There are some things happening out there that suggests that risk appetite is strong,” said Russ Mould, investment director at AJ Bell.

“If you're looking through to 2021, we're hoping that the vaccines will begin to counteract the effect of the pandemic, and hopefully economic activity will begin to normalise.”

Travel and leisure stocks, one of the worst performing sectors this year, added 0.2 per cent, as they stand to be among the top beneficiaries of a coronavirus vaccine.

German shares ended a shortened session about 0.3 per cent lower, in their last trading day this year. But they added more than 3 per cent in 2020, thanks to flows into heavyweight technology stocks.

Spanish lender Unicaja rose 2.1 per cent, while Liberbank was down 4.1 per cent, after they announced an all-in share deal that would create the country's fifth-biggest bank.

The deal marks an acceleration of the sector's consolidation after the approval of a merger between state-owned Bankia and Caixabank earlier this month.

The wider banking index fell 0.3 per cent and is among the worst performing sectors this year alongside energy, as mounting bad loans due to the impact of the pandemic and record low interest rates hammered the appeal for the sector.

UK stocks ended lower despite the local approval of AstraZeneca's Covid-19 vaccine. Resource stocks were the biggest weight on the benchmark blue-chip index, due to weakness in metal prices.

Rio Tinto and Anglo American were among the biggest drags on the FTSE 100.

Meanwhile, Wall Street indexes hit all-time highs this week on hopes that US lawmakers will approve a large fiscal stimulus package despite delays. ― Reuters

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