European Stocks Slide to Post Biggest Weekly Drop Since July

(Bloomberg) -- European equities tumbled a second day, posting their worst weekly drop since July, as investors exited some of this year’s biggest winners amid concerns about stretched valuations.

The Stoxx Europe 600 Index closed 1.1% lower, after swinging between gains and losses intraday, taking its weekly decline to 1.9%. Technology and real estate stocks led the drop. The move is similar to yesterday’s when the losses in the Nasdaq 100 spoiled appetite for risk assets. On Friday, the retreat in U.S. tech giants Amazon.com, Apple Inc., Microsoft Corp. and Facebook Inc. pushed the tech-heavy index to a two-week low.

Banks provided a rare bright spot on Friday, as a potential merger between Spain’s CaixaBank SA and Bankia SA lifted the sector to the top of the benchmark. Other European lenders were swept up in the optimism about further consolidation in the industry with Commerzbank AG and Societe Generale among the biggest climbers.

European equities have been under pressure this week on concern that the rally in growth stocks, and particularly in the tech sector, has been overdone. Still, a rotation into cheaper value and cyclical shares may eventually benefit Europe over the U.S., in addition to sheltering the Stoxx 600 from major losses, because the presence of tech stocks in the European benchmark is limited.

“The extent of Thursday’s selloff, and the one we are seeing today, on the back of very little in terms of new events or information, is a reminder that at extreme valuations share prices can be volatile,” said Adrian Lowcock, head of personal investing at Willis Owen. “If you don’t take profits the market will do it for you.”

©2020 Bloomberg L.P.