European stocks fell, halting two straight weeks of gains

European stocks fell, halting two straight weeks of gains, as investors kicked off the last full week of trading of the year. The Stoxx Europe 600 Index fell 0.3 per cent in London, with miners and automakers leading declines as the dollar retreated versus most major peers.

In a reversal of the recent rotation into cyclical shares, defensive stocks including utilities, real estate and technology firms rose. The VStoxx Index of euro-area stock volatility on Friday closed at its lowest level in more than two years.

The measure tumbled 39 per cent since the US election as speculation of stronger economic growth boosted equities. The volume of Stoxx 600 shares traded on Monday was 22 per cent lower than the 30-day average, data compiled by Bloomberg show. “We expect rising nominal GDP and EPS growth in 2017,” Citigroup Inc. strategists wrote in a Monday note. “This should support decent gains for European equities and we maintain our end-2017 targets of 380 for Stoxx and 7600 for FTSE 100. We continue to position for rising oil/commodity prices, inflation and yields and still prefer commodity, financial and cyclical sectors over defensives.”

The Stoxx 600 is on course for its first annual decline since the peak of the sovereign-debt crisis in 2011, while the FTSE 100 is poised for its best rally in three years as a weaker pound boosted its exporters post-Brexit. “Having come off a decent December so far for European stocks which have seen a number of significant breakouts, the key question as we head into year-end is whether these gains of the past two weeks are likely to be sustained,” according to Michael Hewson, a market analyst at CMC Markets in London.