European equities fell for the first day in five amid concerns about the reported possibility of conflict among policymakers over a stimulus package for the single-currency region.
The STOXX Europe 600 closed 0.78 percent lower in London at 365.43, trimming its weekly gain to 1.98 percent.
Cyclical or more economically sensitive sectors led the declines, with banks, automakers and household goods falling more than 1 percent.
The US markets were closed for Independence Day, which usually means lower trading volumes in Europe.
Investors fled risk assets after Bloomberg News reported that the European Central Bank (ECB) is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy.
Market players are concerned about such friction possibly undermining a program unveiled at the height of the crisis that was meant to reassure investors of the ECB’s resolve in maintaining the unity of the euro alliance.
A potential spat would have significant negative implications for European equities, which have become global investors’ favorites in the past few weeks.
The likes of BlackRock Inc have recommended buying the previously unloved asset class because of the strength and decisiveness of the European fiscal and policy response.
German Chancellor Angela Merkel said that time is pressing for EU member states to reach an agreement on an economic recovery plan.
The bloc’s member states are negotiating a 750 billion euro (US$843.37 billion) fund, drawn partly from joint borrowing, to pull the 27-member bloc out of economic peril.
Earlier, data showed that purchasing managers’ indices from the euro area, Germany and the UK came in ahead of forecasts.
Although the euro-area economy should grow again in the third quarter, weak demand and mounting job cuts would likely curtail the recovery.
“The open question is, which path is embedded in the stock market,” Nordea Investment Funds macro strategist Sebastien Galy wrote in a note. “The Eurostoxx Cyclical index recovered half of its value since the COVID-19 crisis, having suffered a tiny fraction of the shock of the Great Financial Crisis that suggests a more rapid pace of recovery than is likely.”
Meanwhile, UK stocks also ended lower on Friday, with the FTSE 100 index wiping out gains for the week as a record surge in US COVID-19 cases made investors question the chance of a swift global economic recovery.
The blue-chip FTSE 100 slid 1.33 percent to 6,157.30, with BP PLC and Royal Dutch Shell PLC among the biggest drags, as the new infections raised the specter of further lockdowns and hit oil prices. The index was down 0.03 percent for the week.
“Stocks enjoyed a big rally yesterday on the back of the optimism about a possible COVID-19 vaccine, but all of the gains the FTSE 100 made yesterday have been lost today on renewed health fears,” CMC Markets UK analyst David Madden said.
British stocks had opened higher on Friday as data showed China’s services sector expanded at its fastest pace in more than a decade last month.
Data showed a historic slump across British businesses leveled off last month as some of the economy reopened from the COVID-19 lockdown.
UK stock markets have rebounded sharply from a virus-driven crash in March, helped by historic stimulus and, more recently, data that had raised hopes that the worst of the pandemic’s economic damage might be over.
Additional reporting by Reuters
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