Europe close: Shares end 2020 on low note as Covid worries persist

European stocks finished an eminently-forgettable 2020 in the red as tougher Covid restrictions in the UK and new US tariffs on EU products dampened investor enthusiasm.

Volumes were thin, with traders away and the German and Italian bourses closed, while others were only open for half a day.

The pan-European STOXX 600 was down 0.34% - the index has fallen 4% in 2020. Germany’s DAX ended 2020 with a 3.5% gain on Wednesday and just below all-time highs, while Italy’s FTSE MIB was down 5.4% for the year.

In the UK, the FTSE 100 fell 1.45% as eight in 10 Britons found themselves under the highest coronavirus restrictions in an attempt to stymie the spread of a new variant. The pound also gained on Thursday, hitting the export-heavy blue-chip index, leaving it down 14.3% lower for the year.

Meanwhile, sterling was up 0.3% against the dollar at 1.3660, hitting its best level since May 2018, having rallied sharply on Wednesday after British lawmakers approved the Brexit trade deal.

IG market analyst Joshua Mahony said the value and cyclical nature of the UK markets has ensured significant underperformance compared with their US counterparts.

"Travel and housing are at the forefront of today’s losses, with worries over an extended period of economic restrictions heightening the clear uncertainty of exactly how hard the UK economy will suffer on its exit from the EU," he said.

"The government’s Brexit deal does allay many of the fears over a potential breakdown at the border, yet questions remain over how hard the services sector will suffer from a deal which pays little attention to an area which makes up a whopping 80% of the UK economy."

Mahony added that while short-term fears over Covid restrictions and Brexit implications will understandably ensure volatility over the months to come, the prospect of a reopening effort in the second quarter should provide the basis for a much better 2021 for UK stocks.

French stocks were hit after the U.S. government said it would raise tariffs on EU products including aircraft components and wines from France and Germany. It is the latest chapter in a 16-year battle over aircraft subsidies between Washington and Brussels.

Drinks maker Pernod Ricard fell 2.06%, while UK rival Diageo slumped 3.7%.