European stocks ended lower on Friday, closing out another lackluster week as business activity in the eurozone shrank this month after stringent lockdowns to control the COVID-19 pandemic shuttered many businesses.
The pan-European STOXX 600 fell 0.6 percent, but clung to a small 0.2 percent rise for a week, dominated by hopes for massive US stimulus under US President Joe Biden.
Travel and leisure stocks fell 2.5 percent, leading declines among sectors amid concerns over fresh travel restrictions in Europe. Other economically sensitive sectors like banks, oil and gas, and mining shed more than 1 percent.
IHS Markit’s flash composite purchasing mangers’ index (PMI) for the eurozone fell further below the 50 mark separating growth from contraction, hitting 47.5 this month, from last month’s 49.1.
The bloc’s dominant service industry was hit hard, with hospitality and entertainment venues forced to remain closed, but manufacturing remained strong as factories largely stayed open.
The auto-heavy German DAX fell 0.2 percent, France’s CAC 40 dropped 0.6 percent and eurozone stocks were down 0.6 percent.
The sealing of a post-Brexit trade deal, unprecedented stimulus measures from central banks and governments, and hopes that COVID-19 vaccines would spur a faster economic rebound drove the STOXX 600 to a near 11-month high this week.
“There is quite a big discussion in the market on whether the consensus is too bullish, or if we need to have a pullback,” Morgan Stanley chief European equity strategist Graham Secker said. “I think this is more about the fact the markets had a strong run over the past few months. Maybe it gives people an excuse for some profit-taking.”
“While the long-term narrative is intact, the market tends to give the benefit of doubt,” he said.
A European Central Bank survey showed that the eurozone economy is likely to rebound this year — but at a slower pace than expected only a few months ago — before making up the lost ground next year.
Germany’s Lufthansa AG, Air France and British Airways-owner IAG SA fell 2.5 to 3.4 percent, while holiday group TUI tumbled 17.2 percent after the EU proposed to label hotspots of COVID-19 infections as “dark red” zones.
Travelers from those areas would have to take a test before departure and undergo quarantine.
The UK’s FTSE 100 fell 0.3 percent and mid-cap stocks slid 1 percent after the UK’s retail sales marked a weak end to their worst year on record last month, while business activity contracted sharply in the latest month.
Italian stocks fell 1.5 percent after the country’s main ruling parties flagged snap elections as the only way out of its political impasse if Italian Prime Minister Giuseppe Conte fails to drum up a parliamentary majority after scraping through a confidence vote this week.
Helping limit losses in Germany’s DAX, engineering group Siemens AG jumped 7.3 percent on stronger-than-expected preliminary results for its first quarter.
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