European stocks fell on Friday, reversing almost all of its weekly gains after data showed euro zone business activity shrank in January as renewed coronavirus lockdowns to control the pandemic shuttered many businesses.
The pan-European STOXX 600 index fell 0.7% and was set to end the week almost flat after gaining earlier on hopes of a massive U.S. stimulus under President Joe Biden.
Travel and leisure stocks fell 2%, while other economically sensitive sectors such as automakers, oil & gas and mining shed more than 1.5%.
IHS Markit’s flash composite Purchasing Mangers’ Index (PMI) for the euro zone fell further below the 50 mark, separating growth from contraction, to 47.5 in January from December’s 49.1.
The bloc’s dominant service industry was hit hard, with hospitality and entertainment venues forced to remain closed, but manufacturing remained strong as factories largely remained open.
The German DAX fell 0.6%, France’s CAC 40 dropped 0.7% and euro zone stocks were down 0.8%.
“Since countries haven’t opened up, especially with Germany closed down over Christmas, there’s no reason why the services sector is going to significantly recover,” said Connor Campbell, financial analyst at SpreadEx.
“The weakness in the sector is going to persist until lockdown eases significantly.”
A European Central Bank survey showed the euro zone economy is likely to rebound this year, but at a slower pace than expected only a few months ago, before making up for the lost ground in 2022.
Germany’s Lufthansa, Air France and British Airways-owner IAG fell between 2.2% and 3.5%, while holiday group TUI tumbled 9.8% after the European Union proposed to label hotspots of COVID-19 infections as “dark red” zones.
Travellers from those areas will have to take a test before departure and undergo quarantine.
UK’s FTSE 100 fell 0.4% after retail sales bounced back weakly in December, marking their worst year on record, while public debt climbed to its highest since 1962.
Among gainers, German engineering group Siemens AG rose 4.5% on stronger-than-expected preliminary results for its first quarter, driven by a strong performance of its digital division.
Siltronic AG gained 2.3% after Taiwan’s Globalwafers raised its takeover bid to 140 euros ($170) per share as it plans to create a leading player in the wafer industry.
Spain’s Prisa, the owner of influential newspaper El Pais, jumped 6.6% after French media company Vivendi agreed to buy a 7.6% stake in the company.
(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Arun Koyyur)