European stocks post worst week since October on vaccine woes

(Reuters) – European stocks slid on Friday, recording their worst weekly performance since October as concerns around the slow rollout of COVID-19 vaccines mount, while a retail trading frenzy led to volatility on Wall Street.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 26, 2021. REUTERS/Staff

The benchmark STOXX 600 index closed 1.9% lower, erasing all of January’s gains and ending the week down 3.1%

Germany’s DAX fell 1.7%, the UK’s blue-chip FTSE 100 dropped 1.8% and U.S. stocks fell more than 1% after underwhelming COVID-19 vaccine data from Johnson & Johnson.

Concerns around the potential economic damage from a new strain of the coronavirus in Europe and delays to vaccine rollouts have dented sentiment in the past few days.

In the U.S., where the stock market enjoyed a stimulus-led rally last year, volatility was seen following steep gains in heavily shorted stocks, including Gamestop and AMC Entertainment after retail traders piled in.

Europe’s medicines regulator approved AstraZeneca and Oxford University’s COVID-19 vaccine for people over the age of 18 on Friday, the third vaccine to be cleared for use in the European Union.

Europe urgently needs more shots to speed up its inoculation programme, with AstraZeneca, Pfizer and Moderna facing difficulties in delivering the shipments to the bloc.

“We’re postponing the recovery story a little bit because of the lockdown measures and challenges for European growth,” said Joseph Little, global chief strategist at HSBC Global Asset Management, London.

“I’m still optimistic on parts of Europe which have lagged rather badly, economically and in markets. They could begin to perform as the cyclical catch-up becomes more important.”

Economy-linked stocks of banks, insurers, miners and oil & gas companies were among the worst hit this week but Germany and Spain’s economies recorded growth in the fourth quarter, while the French economy contracted by a smaller than expected rate.

In a busy day for earnings, Sweden’s Ericsson jumped 7.6% after reporting fourth-quarter core earnings ahead of market estimates on the back of strong sales of 5G equipment.

Daimler edged up 0.9% after it said a strong fourth quarter helped it post better-than-expected 2020 group operating profit and that it was optimistic for 2021.

Swedish fashion retailer H&M fell 5.0% as it braced for a loss in the first quarter after full-year profits plummeted due to COVID-19.

Europe’s earnings season has been largely positive so far. Of the 8% of STOXX 600 companies that have reported, 78% have topped profit estimates, according to Refinitiv IBES data.

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