European stocks on Thursday closed lower, ending the year in the red as tighter COVID-19 restrictions in the UK and higher US tariffs on some EU products dampened spirits on the final trading day of the year.
Volumes were thin, with many traders away and most major European bourses closed, except London, Madrid and Paris.
The pan-European STOXX 600 index recorded a 3.7 percent drop over the year — lagging its Asian and Wall Street peers that traded near record highs — as a surge in COVID-19 cases and concerns about the UK leaving the EU weighed on the continent’s markets.
Still, the index is only 7 percent below its record high after rallying about 50 percent from March lows and as expectations of more stimulus, the rollout of COVID-19 vaccines and a Brexit trade deal sealed last week raised bets on a stronger recovery this year.
On Thursday, the STOXX 600 declined 0.3 percent to close at 399.03, but was up 0.77 percent from a week earlier.
“Vaccines will inspire a global recovery, central banks will leave rates at zero even if inflation rises to fund exploding government deficits everywhere,” Oanda Corp senior market analyst Jeffrey Halley wrote in a note. “The search for yield in a zero percent world flooded with unlimited free money from the world’s central banks, means the K-shaped recovery, asset price inflation scenario seems a certainty.”
At the end of a shortened session, London’s FTSE 100 fell 1.45 percent to 6,460.52, down 0.64 percent on the week.
Paris’s CAC 40 dropped 0.86 percent to 5,551.41, but rose 0.53 percent from a week earlier. Spanish stocks fell 0.99 percent to 8,073.7, losing 0.47 percent weekly.
Among European stock sectors, energy stocks were the worst annual performers, shedding 25.5 percent as movement restrictions to contain COVID-19 eroded oil demand.
Technology stocks outperformed their peers with a 14.1 percent annual gain as the sector proved to be the most resilient to pandemic-related disruptions.
The FTSE 100 marked its worst year since the 2008 financial crisis — with its near-term prospects hit after British Prime Minister Boris Johnson ordered millions more people to live under the strictest COVID-19 restrictions to counter a new virus variant.
The German DAX ended the year with a 3.5 percent gain — just below all-time highs — helped by strong demand for technology stocks and better growth prospects for major trading partner China.
Lender-heavy Italy’s FTSE MIB was down 5.4 percent for the year, while Spain’s IBEX — among the worst performers in the region — marked its worst year since 2010, shedding more than 15 percent.
The tourism-reliant economy was hit by pandemic restrictions, while a consolidation in Spain’s banking sector — which brought the number of banks to 10, down from 55 prior to the 2008 economic crisis — failed to impress investors.
Additional reporting by staff writer
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