(Reuters) – European stocks ended lower on Friday, ending another lackluster week as trade activity in the eurozone declined in January after strict lockdowns to control the coronavirus pandemic shut down many companies.
The pan-European STOXX 600 index fell 0.6%, but held onto a slight 0.2% rise for a week, dominated by hopes of a massive US stimulus under President Joe Biden.
Travel and leisure values fell 2.5%, dragging down sectors across sectors amid concerns over new travel restrictions in Europe. Other economically sensitive sectors like banking, oil and gas, and mining lost more than 1%.
IHS Markit’s Flash Composite Purchasing Managers Index (PMI) for the euro zone fell further below the 50 mark separating growth from contraction, reaching 47.5 in January from 49.1 in December.
The bloc’s dominant service industry was hit hard, with hospitality and entertainment establishments forced to remain closed, but manufacturing remained strong with factories remaining widely open.
The German auto-heavy DAX fell 0.2%, France’s CAC 40 fell 0.6%, and eurozone stocks fell 0.6%.
The signing of a post-Brexit trade deal, unprecedented stimulus from central banks and governments, and hope that COVID-19 vaccines will spur a faster economic rebound have driven the STOXX 600 to a almost 11 month high this week.
“There is a fairly broad discussion in the market as to whether the consensus is too bullish, or whether we need to have a pullback,” said Graham Secker, chief European equities strategist at Morgan Stanley.
“I think it has more to do with the fact that the markets have been doing well over the past few months. Maybe it gives people an excuse to take a profit.
“While the long-term narrative is intact, the market tends to give the benefit of the doubt.”
A European Central Bank survey showed that the eurozone economy is expected to rebound this year – but at a slower pace than expected just a few months ago – before catching up in 2022.
Germany’s Lufthansa, Air France and IAG, owner of British Airways, fell between 2.5% and 3.4%, while holiday group TUI fell 17.2% after the European Union proposed label hot spots of COVID-19 infections as “dark red” areas.
Travelers from these regions will be required to take a pre-departure test and undergo quarantine.
The UK’s FTSE 100 fell 0.3% and mid-cap stocks slipped 1.0% after UK retail sales marked a weak end to their worst year on record in December, while business activity contracted sharply over the past month.
Italian stocks fell 1.5% after the country’s main ruling parties signaled the snap elections as the only way out of its political deadlock if Prime Minister Giuseppe Conte fails to muster a parliamentary majority after having passed a vote of confidence this week.
Helping to limit losses in the German DAX, engineering group Siemens AG jumped 7.3% on stronger than expected preliminary results for its first quarter.
The world’s largest automaker Volkswagen grew 1.9% on rebound in premium car sales in China and stronger deliveries in the fourth quarter helped it stay in the dark for the year last, although its profit almost halved due to the impact of the pandemic.
Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Arun Koyyur and Jan Harvey