(Bloomberg) -- European stocks fell as investors appraised a rally that drove shares to an eight-month high, against the backdrop of worsening Covid-19 cases in major economies.
The Stoxx Europe 600 Index closed down 0.9%, after a strong start to the month. Leaders in this week's surge -- banks and energy shares -- underperformed, while telecoms was the only sector to advance on Thursday.
European equities soared earlier this week as optimism about progress in developing a coronavirus vaccine spurred a rotation into market laggards that had been weighed down by the lockdowns and economic woes.
Technical indicators show signs of the rally overheating, with the Stoxx 600 testing its March resistance after entering overbought territory. While the value rally is on pause, many strategists see the trend sustaining in the coming months on bets of a return to economic normalcy.
After the news this week “we are now starting to hear some more discerning voices make their presence felt, in terms of the logistical difficulties involved in the distribution of this vaccine, as well as how effective the vaccine is likely to be on a longer-term basis,” said Michael Hewson, chief market analyst at CMC Markets. “These concerns could well start to see a little profit taking start to creep in.”
Among notable movers, BNP Paribas SA was among the worst performers in the banking index after French regulators were said to be probing its deal for Deutsche Bank AG's business catering to hedge funds over a fee to a middleman. Meanwhile, Royal KPN NV jumped after private equity firm EQT AB was said to have approached the Dutch firm about a takeover.
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