European markets fall as nerves persist over retail trading mania; Ericsson up 7% after earnings beat

LONDON — European markets retreated Friday morning as market jitters persist over a retail trading frenzy that has rocked Wall Street.

The pan-European Stoxx 600 fell 1.1% by mid-morning, with household goods shedding 1.7% to lead losses as all sectors slid into negative territory except telecoms, which bounced 0.9% after strong earnings from Ericsson.

European stocks are tracking the overnight trade in Asia-Pacific, where shares broadly declined on Friday, with South Korea’s Kospi index falling 3% to lead losses among major markets.

Stateside, stock futures dropped sharply in the early hours of Friday as a volatile week looks set to continue on Wall Street. U.S. markets rallied on Thursday after the Dow and S&P on Wednesday posted their worst sell-off for three months.

Sentiment has been jolted by a surge in speculative trading from retail investors, and several e-brokers took steps to curb the deliberate buying of heavily-shorted names on Thursday after a week of huge and seemingly synthetic moves in unfavored names like GameStop, spurred by Reddit group WallStreetBets.

However, GameStop and AMC entertainment shares were surging once again in after-hours trading after Robinhood said it will allow some limited buying of restricted shares on Friday.

In other news, Novavax said on Thursday that its Covid-19 vaccine is 89.3% effective in a trial conducted in the U.K., and almost as effective at combating the new variant first discovered in the U.K.

Tensions between vaccine maker AstraZeneca and the European Union continued on Thursday, with the bloc warning drug companies on Thursday that it would wield all possible legal power to prevent exports unless they committed to supplying inoculations as promised.

In corporate news, Daimler beat 2020 full-year profit expectations on Thursday on the back of a strong fourth quarter, with earnings before interest and taxes (EBIT) coming in at 6.6 billion euros ($7.99 billion) versus the 5.25 billion euros expected by analysts. The German automaker also struck an optimistic tone in its 2021 guidance.

New Commerzbank CEO Manfred Knof plans to cut a further 10,000 jobs and close hundreds of branches, Germany’s second-largest lender announced Thursday.

On the data front, the French economy contracted by less than expected in the fourth quarter of 2020 amid a second national coronavirus lockdown, official statistics revealed Friday. Fourth-quarter GDP (gross domestic product) came in at -1.4% versus the -4% average consensus in a Reuters poll.

Ericsson shares jumped 7.7% to the top of the Stoxx 600 after the Swedish telecoms company comfortably surpassed fourth-quarter profit expectations.

At the bottom of the European blue chip index, German car battery maker Varta and biotech firm Evotec fell 10.5% and 7.9% respectively. Both stocks had been boosted in previous sessions by the unwinding of large short positions by the Wall Street hedge funds under attack by retail traders.

– CNBC’s Maggie Fitzgerald contributed to this report.

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