Europe: Stocks erase gains as ECB warns growth is losing steam

[LONDON] European stocks erased earlier gains and closed little changed after the European Central Bank chief warned that European economies are losing momentum more quickly than expected as new Covid-19 lockdowns threaten the recovery.

The Stoxx Europe 600 Index closed down 0.1 per cent in London, after yesterday slumping to a five-month low following the announcement of new restrictions in France and Germany.

Among the biggest decliners, Nokia plunged 18 per cent after lowering its 2020 outlook.

Credit Suisse Group retreated after missing analyst estimates in key businesses.

Cyclicals including travel and leisure and energy stocks led gains after president Christine Lagarde said there was "little doubt" the ECB will agree on a new package of monetary stimulus in December, given the risks from the pandemic. In the US, equities rebounded amid better-than-forecast economic growth data.

"For today, Christine Lagarde stuck to talking the talk," said Jai Malhi, global market strategist at JPMorgan Asset Management.

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"In December, pressure will be huge for the ECB to walk the walk. The major question remains, whether the tools available to the ECB will be enough to satisfy markets and support the economy through the pandemic."

Looming additional restrictions across Europe have triggered fears that the economic recovery will come to a halt, pushing the Stoxx 600 into oversold territory for the first time since March.

The US election and difficult fiscal stimulus negotiations have added to the uncertainty, with European equities set for the worst monthly drop since March.

Among the biggest gainers, Royal Dutch Shell rose after beating expectations and raising its dividend. Vestas Wind Systems, the world's biggest wind turbine manufacturer, gained after agreeing to buy out Mitsubishi Heavy Industries's 50 per cent share in the partnership.

Evan Brown, head of multi-asset strategy at UBS Asset Management, said that investors should look ahead to positive news on a vaccine for Covid-19 and is optimistic that the growth in virus cases will stabilize in Europe following the new restrictions.

"We're approaching a buying opportunity in European equities," Brown said in a Bloomberg TV interview.

"The repricing that we're seeing right now is a reaction to what's going to be a weaker fourth quarter, but very soon the market will look to better days ahead."

BLOOMBERG