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Jan. 15, 2021, 11:08 a.m. EST

European stocks fall as Biden’s stimulus plan fails to cheer COVID-19 worried investors

By Barbara Kollmeyer

European stocks fell on Friday as the announcement of a highly anticipated stimulus plan from President-elect Joe Biden failed to cheer investors, who remain concerned over climbing COVID-19 cases on both sides of the Atlantic.

The Stoxx Europe 600 index (STOXX:XX:SXXP) fell 0.9% in a week that has seen it drop around 1%. The German DAX (XEX:DX:DAX) and French CAC (PAR:FR:PX1) dropped 1.2% each and the FTSE 100 (FTSE:UK:UKX) traded 1% lower. The euro (XTUP:EURUSD) and pound (XTUP:GBPUSD) were both weaker against the dollar.

Biden announced a $1.9 trillion coronavirus relief plan that includes increasing direct cash payments to Americans to $2,000 and money for distributing COVID-19 vaccines. U.S. stocks were under pressure in early trading as data also showed retail sales fell a third straight month.

“The President-elect also made clear that he would be laying a second, broader economic recovery plan in February at a joint session of Congress. That plan will lay out infrastructure spending and plans to attack climate change. It seems it will also lay out tax raising plans which is catching the market off guard a little this morning,” said a team of strategists at Deutsche Bank led by Jim Reid.

Investors are grappling with a third wave of COVID-19 cases, and concerns as even China finds itself dealing with a resurgence in cases and hospitalizations. The U.S. now has a quarter of the global tally of new cases, or 23 million infections.

In Europe, France will impose a nationwide 6 p.m. curfew on Saturday , with initial plans for 15 days to battle climbing cases. Spain reported 38,869 new coronavirus infections on Wednesday , the highest on record and three times the worst level seen in the first wave, with hospitalizations rising.

“There is renewed enthusiasm about the U.S. due to the prospects for more stimulus and the new administration’s pledge to focus on the vaccinations’ rollout. Meanwhile, Europe recovery is throttled by additional lockdowns and a fumbled vaccine rollout program,” said Stephen Innes, chief global markets strategist at Axi, in a note to clients.

The U.K.’s Office for National Statistics reported that the country’s economy shrank 2.6% in November, after six straight months of growth since lockdowns in the spring. But that was less than the 4% drop forecast by economists polled by The Wall Street Journal.

Friday’s selloff was focused on companies that are geared toward economic recoveries, such as commodity plays. Oil prices, which have also benefited from the rally, fell over 1%, dragging down shares of heavily weighted BP (LON:UK:BP) (NYS:BP) , Royal Dutch Shell (NYS:RDS.A) (LON:UK:RDSA) down more than 1% each and Total off 2.7%. And big mining stocks such as Rio Tinto (LON:UK:RIO) (NYS:RIO) were also under pressure.

Earning season is slowly revving up in the U.S. and Europe, with JPMorgan (NYS:JPM) among the big banks that reported on Friday. The bank’s shares fell 2.5% even after results topped estimates .

Read: Expect another quarter of big earnings beats, as Wall Street estimates were likely overly depressed

An early gainer, SAP (NYS:SAP) (ETR:XE:SAP) slipped into the red by afternoon. The German software giant pre-announced fourth-quarter results , reporting a sequential improvement “even as the COVID-19 crisis persisted and lockdowns were reintroduced in many regions.”

Carrefour’s (PAR:FR:CA) shares were again on the decline, dropping 3% after the French government voiced objections to prospects of a takeover for the supermarket owner when it and Canada’s Alimentation Couche-Tard  (TSE:CA:ATD.A) announced early-stage talks earlier in the week.

Shares of information-technology company Aveva (LON:UK:AVV) surged 5.7%, after it said revenue growth rose in the first nine months of fiscal 2021 and that it was confident in its full-year outlook.

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