European Stocks Close Sharply Lower As Surge In Speculative Trading Hurt Sentiment

European stocks closed sharply lower on Friday as a surge in speculative trading from retail investors jolted sentiment and triggered heavy selling at several counters.

Lingering concerns over tight liquidity in China, rising coronavirus cases, lockdown restrictions, and the slow pace of vaccination in the Euro area due to supply delays also rattled investors.

In the U.S. market, there has been a huge surge in speculative trading from retail investors organized over online forums, such as Reddit.

Hedge funds and other large investors that bet against GameStop have lost more than $5bn after a cohort of amateur investors joined forces to inflate the price of shares in the U.S. video game chain, according to data analytics company S3.

The pan European Stoxx 600 tumbled 1.67%. The U.K.’s FTSE 100 slid 1.82%, Germany’s DAX declined 1.71% and France’s CAC 40 fell 2.02%, while Switzerland’s SMI lost 2.38%.

Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Greece, Ireland, Netherlands, Poland, Portugal, Russia, Spain, Sweden and Turkey ended with sharp to moderate losses.

Iceland and Norway closed higher.

In the UK market, Rolls-Royce Holdings, Prudential, M&G, Barratt Developments, Associated British Foods, Imperial Brands, HSBC Holdings, Standard Life and British American Tobacco shed 3 to 5.4%.

Just Eat Takeaway rallied 4%. Pearson ended higher by about 1.6%, while Fresnillo and Smiths Group closed with modest gains.

In the German market, Munich RE, Deutsche Bank and SAP ended more than 3% down. Fresenius Medical Care, Deutsche Post, Fresenius, Allianz, Bayer and Lufthansa lost 2 to 3%. Covestro and Daimler closed notably higher.

In France, LVMH, BNP Paribas, Vivendi, Technip, Air France-KLM, Vinci, Bouygues, Sanofi, Carrefour, ArcelorMittal, Airbus, Societe Generale, Safran and Credit Agricole lost 2 to 4%.

On the other hand, Michelin gained more than 2.5%. STMicroElectronics and Publicis Groupe posted modest gains.

Swedish fashion retailer H&M declined sharply after it reported a drop in full-year sales and profit.

Shares Ericsson gained nearly 8% after the telecom company posted forecast-beating fourth-quarter net profit. Shares of fragrance and flavor products maker Givaudan lost more than 3.5% after confirming its mid-term targets.

In economic news, Germany’s unemployment rate rose marginally in December, climbing to 4.6% from 4.5% a month earlier, the labor force survey from Destatis showed.

Germany’s import prices fell 3.4% year-on-year, but slower than the 3.8% decline in November, data from Destatis showed. Economists had forecast an annual fall of 3.1%.

On a monthly basis, import price inflation rose slightly to 0.6% from 0.5%, but that was slower than the expected growth of 0.9%.

The German economy managed to expand in the fourth quarter avoiding a double-dip recession, despite the second wave of coronavirus triggered another lockdown at the end of 2020.

Gross domestic product grew 0.1% sequentially in the fourth quarter, slower than the 8.5% expansion posted in the third quarter, data published by Destatis revealed. Economists had forecast nil growth.

On a yearly basis, GDP, adjusted for calendar-effects, declined 3.9% after falling 4% in the third quarter. At the same time, the annual fall in price-adjusted GDP slowed to 2.9% from 3.9%. The resulting GDP for the whole year of 2020 was 5% lower than in 2019, the biggest fall since the 2008-2009 global financial crisis.

According to preliminary data from the statistical office Insee, the French economy contracted less-than-expected in the fourth quarter as the impact of the recent curfews and restrictions related to Covid-19 pandemic was less severe than the first lockdown put in place during the March to May period.

The report said, France’s GDP dropped by 1.3% sequentially, in contrast to an 18.5% rise in the third quarter. Economists had forecast a quarterly decline of 4%.

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