Europe close: Brexit worries, US stimulus doubts weigh on sentiment

European shares extended losses on Friday as a no-deal Brexit became an increasingly likely prospect with both sides talking down hopes of an agreement and stimulus talks on Capitol Hill hit a snag.

The pan-European Stoxx 600 gave back 0.77% to 390.12, alongside a 1.36% retreat for the German Dax to 13,114.30 while the FTSE Mibtel ended down 0.97% to 21,702.16.

European Commission President Ursula von der Leyen reportedly told EU leaders that "the probability of a no deal is higher than of a deal".

Later in the session, Boris Johnson told reporters that it was "very, very likely" that no deal was agreed, although he was confident that even that would be "wonderful" for the UK.

Yet several analysts believed the current Sunday deadline for striking an agreement might yet be extended, including past 31 December in the case of those at RBC.

Sentiment was also hit by news that a Covid-19 vaccine being developed by Sanofi and GlaxoSmithkline had been delayed as it did not provide a sufficient immune response in elderly people. Sanofi shares were down 4% on the news while Glaxo stock was slightly lower.

Banks and housebuilders slumped amid Brexit worries, with Barclays, Lloyds, NatWest, Persimmon, Taylor Wimpey and Barratt Developments all weaker.

In the US, lawmakers were reportedly still divided over whether companies should be insulated from lawsuits linked to the pandemic.

Rolls-Royce shares fell despite the company saying it expected to turn cash flow positive in the second half of 2021 as air travel demand started to recover from the Covid-19 crisis driven by vaccination programmes.

It also maintained full-year guidance, adding it was targeting at least £750m in free cash flow, excluding disposals, as early as 2022 and at least £2bn from disposal proceeds.

Bellway was in the red even after saying it expected annual volumes to rise by a quarter as the stamp duty holiday and government help drove higher demand for new homes. The company said its forward order book was up 18.7% to £1.77bn in the 17 weeks to November 2

On the upside, Calisen shares surged after it agreed to be bought by a consortium of investors in a deal that values the smart meter company at £1.4bn.

Elsewhere, meal-kit delivery company HelloFresh surged 11%, prompting rises in Just Eat Takeaway, Delivery Hero and online supermarket Ocado - all of which have benefited from Covid-19 restrictions and lockdowns.