European equities struggled for direction on Thursday, after a surge in coronavirus cases in the US and tightening restrictions in Europe held back a rally driven by optimism over vaccines.
The Stoxx Europe 600 traded flat by late afternoon in London, while Germany’s Xetra Dax rose 0.1 per cent and the UK’s FTSE 100 dropped 0.5 per cent.
Europe’s region-wide benchmark has gained more than 14 per cent in November, putting it on course for its strongest month on record, while London’s blue-chip index has risen 13.9 per cent.
But investors’ attention “seemed to switch back to the growing Covid-19 contagion in the USA”, said strategists at Credit Suisse.
Investors were torn between “rising optimism about a future world where vaccines reduce the impact of the pandemic, and current data, which shows how the pandemic is making life harder”, said analysts at ING in a research note.
The moves came after Angela Merkel, Germany’s chancellor, said on Wednesday that the nation’s partial lockdown would last until at least December 20 and might be extended into January.
Ahead of the Thanksgiving break for Wall Street on Thursday, the US reported 2,046 coronavirus deaths the day before, the highest daily toll since early May, according to data compiled by Johns Hopkins University.
New daily cases in Texas and California hit record highs while New York reported more than 6,000 coronavirus cases in a single day for the first time in seven months.
Data released on Wednesday also showed an unexpected rise in US first-time unemployment claims last week to 778,000, fuelling fears the US economic recovery was stalling.
Technology shares were among the best performers in Europe, as money flowed back to companies set to benefit from extended lockdowns. The economically sensitive energy sector was the weakest performer on the Stoxx 600, while banking and real estate stocks dragged the FTSE 100 lower.
Some fund managers remain broadly positive on equities, with sectors such as travel and industrial production set to bounce back as economies reopen next year.
“The rally has taken a bit of a pause, but it may be a pause rather than a peak,” said Trevor Greetham, investment strategist at Royal London.
Pfizer and German partner BioNTech said this month that their experimental Covid-19 vaccine appeared to be 95 per cent effective, with US biotech Moderna reporting similar trial results for its jab, which had “really been a big game changer”, Mr Greetham noted.
Brent crude, the international benchmark, fell 0.8 per cent to just below $48 a barrel, paring back some gains that pushed the oil price to its highest level since March this week.
With US markets closed, the dollar index traded flat and the spot gold price ticked up 0.3 per cent to $1,811 a troy ounce.
Sterling slipped 0.4 per cent against the dollar, to purchase $1.337, as post-Brexit trade talks between the UK and the EU remained deadlocked.
“With just five weeks today until the transition period comes to an end, there’s still no sign of progress on the key issues in the trade negotiations,” said Jim Reid, strategist at Deutsche Bank. “Tensions are mounting.”
Against the euro, the pound fell 0.1 per cent to buy €1.12.
Sweden’s central bank announced on Thursday that in order to “give further support in an uncertain time [and] improve the conditions for a recovery”, it would boost its asset purchases by SKr200bn ($23.5bn) to up to SKr700bn and extend the quantitative easing programme into 2021. The krona lost 0.3 per cent against the euro, with one unit of the common currency buying SKr10.1.
The euro fell 0.1 per cent against the dollar, buying $1.19.