Europe close: Muted finish as stocks recover, but Christmas cheer lacking

European shares ended flat to slightly higher on Friday, recovering from earlier losses as US markets staged a modest rally, but there was a distinct lack of Christmas cheer amid worries about a global economic slowdown, the ongoing trade dispute between China and the US and a potential government shutdown in Washington.

The benchmark Stoxx Europe 600 index and France's CAC 40 closed flat at 336.66 and 4,694.38, respectively, while Germany's DAX ended up 0.2% at 10,633.82.

IG market analyst Chris Beauchamp said: "Those assuming a Santa rally is now completely off the cards should be aware that the end of December remains a strong period, but we are now grasping at straws. Any rally in the next two weeks is at risk of heavy selling come January."

Sino-US relations weighed on sentiment after the US Justice Department filed charges overnight accusing two members of a Chinese cyber-espionage group of hacking into dozens of US tech and industry giants. It has been alleged that the two individuals were operating in conjunction with the Chinese government, although this has been denied by Beijing.

Meanwhile, rising odds of a US government shutdown also dented the mood, as President Trump and congressional Democrats remained at odds over $5bn funding for his border wall with Mexico.

In a series of tweets, Trump threatened a "very long" government shutdown if Democrats don't go ahead and fund his border wall. "Shutdown today if Democrats do not vote for Border Security!" he tweeted.

In corporate news, Dankse Bank and national peer Jyske Banke were both in the red.

Shares in Danske, at the centre of an international investigation into alleged money laundering, fell as it cut its 2018 outlook for the second time this year, citing challenging market conditions on financial markets. Denmark's biggest lender said it expects net profit for the year of around DKK15bn, down from the DKK16bn-17bn previously forecast.

Elsewhere, Dutch online food delivery company Takeaway.com surged as it agreed to buy the German business of Delivery Hero for around €930m in cash and shares. Delivery Hero also racked up strong gains.

France’s Spie advanced after announcing the sale of a German subsidiary.

On the downside, Vodafone shares fell as the company confirmed it was sacking PricewaterhouseCoopers over litigation concerns, though it was not doing so immediately.

Rumours had been swirling for several days that the FTSE 100 telecoms giant would seek a new auditor, given the threat of litigation from PwC against Vodafone, over the failure of mobile retailer Phones 4U.