European shares pull back on COVID-19 vaccine uncertainty

(Reuters) – European shares retreated from five-week highs on Tuesday as Johnson & Johnson’s move to pause its COVID-19 clinical trials raised doubts about the timeline of a vaccine, while Airbus slipped after JPMorgan downgraded its rating on the stock.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 2, 2020. REUTERS/Staff

A month after AstraZeneca AZN.L suspended late-stage trials of its vaccine candidate, Johnson & Johnson JNJ.N said it had temporarily halted trials due to an unexplained illness in a study participant.

The pan-European STOXX 600 .STOXX snapped a three-day winning streak to fall 0.3%, led by travel and leisure .SXTP, banking .SX7P and insurance .SXIP stocks.

Only two European sectors – telecoms .SXKP and utilities .SX6P – were marginally higher in morning trading, although analysts said the news was unlikely to spark a broader slump in equity markets.

“The sell-off wasn’t too bad as we have been down this road before, but with numerous vaccines in the pipeline, this setback might not be viewed too negatively unless the unexplained illness becomes more expensive in other trials,” said Stephen Innes, a markets strategist at Axi.

Hopes of more U.S. fiscal aid and signs of an economic rebound have powered European stock markets, helping the benchmark STOXX 600 on Monday to hit its highest close in nearly a month.

Fresh data on Tuesday showed China’s imports in September grew at their fastest pace this year, while exports extended strong gains. However, data closer to home painted a less rosy picture as Britain’s unemployment rate rose in August to its highest in more than three years.

“In light of the new restrictions (in the UK) announced yesterday, today’s data will still underplay the level of how much unemployment levels are likely to increase in the months ahead,” said Michael Hewson, market analyst at CMC Markets UK.

Data on German investor sentiment for October is due at 0900 GMT, while focus later in the week will be on a European Union Summit, which is the self-imposed UK deadline for a Brexit trade deal.

Almost all the European country indexes were down by 0808 GMT.

In company news, Airbus SE AIR.PA fell 2.8% as JPMorgan cuts its rating on the planemaker’s stock to “underweight” from “neutral”.

British clothing retailer French Connection Group Plc FCCN.L slumped 18.4% after posting a slump in first-half sales due to the health crisis.

On the other hand, British utility SSE SSE.L jumped 4% to the top of the STOXX 600 as it agreed to sell its 50% stake in West Yorkshire-based Ferrybridge and Skelton Grange assets for 995 million pounds ($1.30 billion).

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