European Stocks Trim Best May Gain Since 2009 on U.S.-China Woes

(Bloomberg) -- European equities fell, halting four days of gains, as concern mounted over an escalation in Sino-U.S. tensions ahead of President Donald Trump’s planned press conference to announce fresh steps on China.

The Stoxx Europe 600 Index declined 1.4% at the close, led down by automakers, travel stocks and banks. The benchmark still closed 3% higher for the month, its best May performance since 2009.

European equities rose in recent sessions, supported by optimism over unprecedented stimulus measures. However, deteriorating Sino-American ties, stoked by antagonism over the cause of the coronavirus and now China’s imposition of a national-security law on Hong Kong, are spooking investors.

“We have participated in the recent equity rally, but now move to a more cautious stance and take risks out of the portfolios as we expect markets to enter a range trading from here,” said Fidelity International’s capital markets strategist Carsten Roemheld. “While there are some good reasons to be optimistic, we think the rally was a bit too fast given there are still many uncertainties left.”

Sector laggards in the rebound from March lows resumed their position near the bottom on Friday, after rallying hard in recent sessions on reopening optimism. Travel and leisure shares fell 4.8%, after rising for five days in a row. TUI AG slid 16% after more than doubling from a low two weeks ago.

B&M European Value Retail SA climbed 5.5% after delivering a surprisingly strong performance during the U.K. lockdown. Renault SA dropped 7.7% after announcing plans to eliminate about 14,600 jobs worldwide and to lower production capacity by almost a fifth.

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