European shares falter as year-end rally fades

By Sagarika Jaisinghani

(Reuters) – European shares looked set to end the decade with a whimper on Tuesday as investors locked in gains after a record rally that was fueled by optimism around trade and easing fears of a global recession.

In a shortened session ahead of the New Year’s Eve celebrations, the pan-European STOXX 600 index () shed 0.3%.

French (), British () and Spanish () stocks lost between 0.4% and 0.8%, while Frankfurt and Milan bourses were shut for the year-end holidays.

“While market volumes are predictably light, investors continue to strike a year-end cautionary tone as December optimism is gradually giving way to 2020’s uncertainty,” Stephen Innes, a market strategist at AxiTrader, wrote in a note.

Global equities notched multiple record highs in December as investors cheered a breakthrough in U.S.-China trade negotiations and signs of a smoother Brexit. [MKTS/GLOB]

The upbeat mood, coupled with robust economic data and a relatively loose monetary policy by the world’s most influential central banks, have set the benchmark European index on course for its biggest annual gain since the global financial crisis.

But with the finer details about the Phase 1 trade deal not yet known, analysts say scepticism is building around how long the truce will last.

“Once the (Phase 1) deal is signed, investors will then press to consider … how much more progress can be realistically expected ahead of the US elections next year,” Innes said.

For European investors, Brexit clouds are gathering again.

Although Britain’s exit from the European Union is now almost certain on Jan. 31, Prime Minister Boris Johnson’s hard line on the country’s future trade relationship with the bloc has again fanned fears of a no-deal Brexit.

Traders will also be looking at Germany for concrete signs of economic growth, after Europe’s powerhouse teetered on the brink of recession this year.

Despite equities in the country being highly sensitive to trade progress, German shares rose only 0.1% in December, widely underperforming their regional peers.

For the year, the STOXX 600 rose about 23%, but lagged both the wider MSCI world index () and the benchmark S&P 500 ().

In thin corporate news on the final trading day of the year, French aeronautics group Latecoere (PA:) gained 1.7% after agreeing to buy Bombardier’s (TO:) electrical wiring interconnection system business for around $50 million.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.