European stocks ended lower Friday, snapping two days of gains, after the region’s leaders failed to agree on a long-term stimulus package and reports of a failed Covid-19 drug trial weighed on sentiment.
The Stoxx Europe 600 Index fell 1.1% on the day, posting its first weekly drop in three weeks. All 19 industry groups slipped, with cyclicals including carmakers, banks and travel & leisure leading the decline.
Earnings were also in focus: Food giant Nestle SA gained 1.8% after reporting its fastest sales growth since 2015 as consumers loaded up on frozen food. Oil major Eni SpA dropped 2.6% after reporting a slump in first-quarter profit and cutting its production forecast for the year.
The European stock rally has stalled this week, after bouncing from a March low amid monetary and fiscal support and optimism over the slowing rate of infections in a number of countries. Investors are still displaying caution, with cash funds seeing massive weekly inflows, while equity funds continued to bleed, according to data from EPFR and Bank of America Corp.
Bulls were dealt a blow on Friday after German Chancellor Angela Merkel’s pledge to back a huge stimulus package for the European Union wasn’t enough to force through a deal during a videoconference on Thursday. Further damping sentiment, an antiviral drug by Gilead Sciences Inc. was reported to have flopped in its first randomized clinical trial, though the company disputed that characterization.
“The European Council Meeting was a bit a disappointment and market expectations were possibly too high,” says Alberto Tocchio, chief investment officer at Colombo Wealth SA. “We got the impression that the will to find a solution is closer than ever but bureaucracy is working very slow.” The “market will need to be more patient and we are not so sure they will be,” he adds.
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