Europe close: Stocks end down amid US selloff

European stocks ended firmly in the red on Thursday, tracking losses on Wall Street amid renewed concerns about relations between the US and China.

The benchmark Stoxx Europe 600 index closed down 1.7% at 329.54, Germany’s DAX fell 2.4% to 10,381.51 and France’s CAC 40 declined 0.6% to 4,598.61.

Stocks had kicked the session off on the front foot after the Dow Jones surged overnight, racking up its biggest one-day points gain ever. However, by lunchtime it had all become too much as investors and traders sank back in their armchairs and reflected on what had been a grim couple of years for equities.

Chris Beauchamp, chief market analyst at IG ,said: "After yesterday’s record surge in the US, we have seen equities drop back, although most of the gains are largely intact. However, the inability of markets to follow-through on what was a classic ‘bear market rally’ sends a worrying signal - if this was the old bull market of a few months ago the momentum trade would have taken off by now, but instead Wall Street continues to edge lower, while in Europe the reversal has been swift and unrelenting.

"The low volume conditions make it hard to judge whether this bounce has legs, and from the looks of the European session there isn’t much to be positive about. If this is a Santa rally of the true sort, it didn’t last long."

Across the pond, stocks on Wall Street were giving back some of Wednesday’s stellar gains as traders decided to book some profits, with the latest headlines on Sino-US relations doing nothing to encourage any buying. According to Reuters, US President Donald Trump is considering an executive order to ban US companies from using equipment built by China’s Huawei and ZTE.

Weak US consumer confidence data also added to the downside on Wall Street.

Stocks in the US rallied a day earlier on the back of Mastercard data showing that sales during the holiday season rose the most in six years in 2018 and after Kevin Hassett, chairman of the White House Council of Economic Advisers, affirmed that Fed chairman Jerome Powell’s job was ‘100% safe’.

Energy-related shares were under the cosh as oil prices fell back following sharp gains on Wednesday after Russian energy minister Alexander Novak said prices were likely to stabilise in 2019 thanks to pledges to cut production by OPEC and allies earlier this month. The Stoxx 600 oil and gas index ended down 1.1%.

Stephen Innes, head of Oanda Asia Pacific trading, said: "At this point, unless OPEC pulls a rabbit out of the hat and reassure markets the viability of their supply cuts and even impose deeper ones as some members have suggested, global macroeconomic fears will continue to wear like and an anvil around the oil markets neck."

In corporate news, shares in Vinci nudged up after the French construction group said it was buying a majority stake in London’s Gatwick airport for about £2.9bn ($3.7bn).