European Stocks Decline in Longest Losing Streak Since Mid-June

(Bloomberg) -- European equities retreated for a fourth consecutive session, their longest losing streak in nearly three months, as travel stocks slumped over concerns for the sector amid reduced consumer demand and coronavirus risks.

The Stoxx Europe 600 Index fell 0.4% at the close in London after having risen as much as 0.8% earlier in the session. The FTSE 100 underperformed, hit by surge in pound as the benchmark has a negative correlation with the U.K. currency.

Travel shares were led lower by Trainline Plc, which fell the most in a month after its chief executive officer sold stock, and British Airways parent International Consolidated Airlines Group S.A. retreated after being cut to neutral at JPMorgan Chase & Co. Wizz Air Holdings Plc slumped after dropping plans to increase capacity to 80% next quarter after a resurgence of travel restrictions dented demand.

JPMorgan strategists led by Mislav Matejka expect U.S. equities to continue beating Europe because of a slower economic rebound and as growth stocks outperform cheaper value shares. Technology stocks, which have benefited from lockdowns and increased working from home, rallied both in the U.S. and Europe today.

“Into the year-end, we find a mixed risk-reward, expecting the consolidation of European equity indices in particular to continue,” JPMorgan strategists said in a note. “The phase of data normalization from a depressed base is largely ending, with some renewed softening.”

Investors are keenly watching the news about the race to produce a Covid-19 vaccine, with AstraZeneca Plc starting a large-scale human trial of its inoculation in the U.S.

In positive growth developments, the German government forecast that the economic fallout from the coronavirus will be smaller than previously expected this year, according to a person familiar with the updated outlook to be published Tuesday.

“The probability that a Covid-19 vaccine will be approved in the fourth quarter is increasing,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg Bank, who favors European small-cap and cyclical stocks over U.S. tech companies. “In our opinion, such news - or growing evidence of it - should help the recovery of hard-hit coronavirus industries at least in the short term.”

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