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Europe: Stocks end four-day winning run as UK's FTSE drags

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European stocks broke a four-day winning streak on Thursday as ex-dividend trading and a stronger pound hit the UK's blue-chip companies, while investors sold off banks and energy stocks that have outperformed this week.

[BENGALURU] European stocks broke a four-day winning streak on Thursday as ex-dividend trading and a stronger pound hit the UK's blue-chip companies, while investors sold off banks and energy stocks that have outperformed this week.

The pan-European Stoxx 600 closed 0.6 per cent lower, with London's FTSE 100 sliding 1.5 per cent as a jump in the pound hurt exporters on the index, while heavyweights like AstraZeneca, BP, and GlaxoSmithKline traded without entitlement to a dividend payout, hitting their shares.

Reversing a recent trend, investors favoured pockets of markets that have remained resilient in the wake of the coronavirus crisis such as the technology sector. On Wall Street, Apple was set to record US$2 trillion in market capitalisation.

That left some of the cyclical sectors that are more exposed to an economic downturn, such as banks, oil & gas, miners and automakers, falling between 0.8 per cent and 1.9 per cent.

Geir Lode, head of global equities international at Federated Hermes, noted that it is difficult to gauge whether a rally in these cheaper stocks will be sustained.

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"It reflects the uncertainty that still pervades the world as we continue to negotiate our way back to normality as well as increasing US-China tensions," Lode wrote in a note.

After a US move to ban two popular Chinese apps last week, investors were nervous about upcoming talks between Beijing and Washington officials over a trade deal agreed earlier this year.

Meanwhile, US Democrats and Republicans remain deadlocked after weeks of wrangling over a fifth coronavirus aid bill to support a struggling economy.

Trillions of dollars in stimulus and a stellar rally in technology stocks have helped the US S&P 500 index reach striking distance of a record high. The European blue-chip index is still about 15 per cent below its February peak, but the pace of recovery for both from a market crash in March has been similar.

Weak earnings also dented the mood, with struggling conglomerate Thyssenkrupp plunging 16.3 per cent after it said its steel unit would rack up 1 billion euros (S$1.65 billion) in operating losses this year, raising pressure to fix or sell the division.

TUI, the world's largest tourism company, fell 6.2 per cent as it sank to a 1.1 billion euro (S$1.78 billion) loss in the third quarter due to the Covid-19 pandemic.

Danish brewer Carlsberg slid 5.8 per cent on a warning that lockdowns will impact sales in the second half of the year in its key markets of China and Western Europe.

REUTERS

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