Europe close: End of month drubbing for healthcare and banks

European stocks finished January on a sharply down note as investors fretted about stockmarket valuations and Covid vaccine supplies on the Continent, after a week in which a web-inspired group of small investors took on large US hedge funds.

Yet Chris Beauchamp, chief market analyst at IG, emphasised that while share price losses had been "quick and dramatic", they remained a far cry from collapse seen in stocks in March 2020.

"Apart from the manic price action in the usual suspects, the overall moves are fairly moderate, and represent an orderly pullback, and nothing like the madness of March 2020," he told clients.

Nevertheless, his expectation was that a "bleak" non-farm payrolls report in the US due out on the following Friday would once more underline the case for further stimulus.

The pan-European Stoxx 600 index dropped 1.87% to 395.85, alongside a 1.71% drop for Germany's Dax to 13,432.87 and a 2.21% decline in Spain's Ibex 35 to 7,757.5.

Weakness was broad-based among sectors in the Stoxx 600 with Healthcare, Banks, Technology and Oil&Gas all giving back roughly 2% each.

Losses in the former came amid cautious remarks from strategists at Bank of America, who said investors had foregone selling the vaccine news ironically due to the slow rollout of inoculations.

Be that as it may, both Novavax and Johnson&Johnson delivered solid late-stage Covid-19 vaccine trial results on Friday, even as the European Union gave the green light to that from AstraZeneca.

Shares in the former nonetheless did admittedly surge.

Dampening sentiment towards the tech space perhaps, German finance minister, Olaf Scholz, said he was confident that changes to how taxes were levied on the world's technology giants would materialise in 2021.

Some analysts were also watching for any signs that some hedge funds' recent difficulties in shorting certain small-cap stocks in the US, such as GameStop or AMC Entertainment, could feed weakness in big tech firms' shares, as those funds are forced to take profits on their more profitable positions to cover losses elsewhere.

That, said BofA would constitute a "more sinister development" as opposed to the at present "small LTCM event" among hedge funds, in reference to the at the time much ballyhooed fund, Long Term Capital Management, for which the US central bank itself was forced to engineer a rescue in 1998.

In other equity news at the end of a busy week for earnings, Sweden’s Ericsson jumped 8% after reporting fourth-quarter core earnings ahead of market estimates on the back of strong sales of 5G equipment. Shares in rival Nokia were up 5% on the news.

Swedish fashion retailer H&M fell after full year profits plummeted and warned that the pandemic would hit it hard in the current quarter.

Trainline shares fell more than 3% after a downgrade to ‘underweight’ at Barclays.

On the upside, Just Eat Takeaway, which has benefited from Covid restrictions and lockdowns, also gained.