European Stocks Erase Gains as Investors Sell Pandemic Winners

(Bloomberg) -- European equities erased gains to end little changed as investors sold the biggest winners of the past six months' rally and as the Federal Reserve chair warned of a weak U.S. recovery without sufficient government aid.

The Stoxx Europe 600 Index ended flat, wiping out an advance of as much as 0.5%. Technology and health-care stocks, among investor favorites since the market started recovering in March, led declines on Tuesday. By contrast, banks and travel and leisure shares, some of this year's worst performers, led gains. Energy shares also outperformed as oil rose.

European equities are off to a volatile start in October following last month's biggest drop since March. President Donald Trump's health condition is in focus after he returned from three days of hospital treatment for Covid-19, just weeks before the presidential election. Investors are also closely watching U.S. lawmaker negotiations on a pandemic relief package, which haven't yielded a deal so far.

“Stimulus hopes will drive sentiment, but election risk is also a factor,” wrote Neil Wilson, chief market analyst at Markets.com.

Stoxx 600 tech shares fell as contracts on the Nasdaq 100 Index declined. A U.S. House panel led by Democrats investigating competition in the technology sector is seeking reforms to block tech giants from both owning marketplaces and selling their own products on them, according to a critique of the recommendations by one Republican member of the subcommittee.

“Given that the FAANGs have been at the front of the market expansion in recent years, any breakup or threat of it may act as a drag on broader market sentiment,” Wilson said. “Calls have been growing louder and louder for the authorities to at least look at antitrust issues for the tech giants.”

Deal activity continued to fuel individual stock moves, with Suez SA up 4.6% after Veolia Environnement SA said it will buy a 29.9% stake from Engie SA for 3.4 billion euros ($4 billion), setting the stage for a full takeover. Veolia gained 2%

©2020 Bloomberg L.P.