European stocks slipped on Friday as investors dumped this year’s outperformers, including technology and healthcare stocks, and bid up banking shares after the US Federal Reserve unveiled its new policy framework.
The pan-European STOXX 600 index slipped 0.52 percent to 368.80, but still ended the week 1.02 percent higher after signs of progress in COVID-19 treatments and vaccines spurred optimism earlier in the week.
Technology stocks, which have surged about 11 percent this year, were down 0.8 percent, and the healthcare index fell 1.1 percent.
Fed Chairman Jerome Powell announced a new policy framework on Thursday, which focuses more on boosting US. economic growth and less on worries that inflation could be running too high.
“If the Fed’s policies succeed in reflating the economy, interest rates are unlikely to fall much further and value stocks such as financials should begin to outperform growth stocks” analysts at BCA Research said.
Interest rate-sensitive banks, which have so far lagged the broader markets, jumped nearly 1.7 percent and were among the best sectoral performers this week.
Shares in BNP Paribas, HSBC and Banco Santander rose between 0.6 percent and 3.6 percent, providing the biggest boost to the STOXX 600.
Still, with COVID-19 cases picking up again in Europe, investors fear that could impede an economic rebound from a crash in the second-quarter, although optimism around the development of a COVID-19 treatment has helped calm some jitters.
“We think an interrupted V-shaped recovery seems to be the way we’re heading,” said Francis Ellison, client portfolio manager of European equities at Columbia Threadneedle Investments.
“That means that we’re seeing a sharp recovery, but nowhere back to 2019 levels, and that will take a year or two to reach,” Ellison said.
Italian state-owned bank Monte Dei Paschi di Siena gained 2.7 percent as it received a conditional green light from the European Central Bank for its bad loan clean-up plan.
Shares in German drugs company Bayer AG fell 2.7 percent.
It said that there were “bumps” in sealing its US$11 billion settlement of US lawsuits over its Roundup weed killer after a US judge cast doubt on the progress of the agreement.
In London the FTSE 100 index closed down for a second week.
The exporter-heavy index dropped 0.61 percent to 5,963.57, also pressured by the sterling which touched an eight-month high as the US dollar fell in the aftermath of Powell’s announcement.
It was down 0.64 percent from a week earlier.
Additional reporting by staff writer
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