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European stocks slide as surge in virus cases hits rebound hopes

(Reuters) - European stocks fell on Friday after gaining ground during the week as a surge in U.S. coronavirus cases made investors less optimistic about prospects for a rebound in the global economy.

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

After opening largely flat, the pan-European STOXX 600 index .STOXX lost ground as the session wore on, with personal & household goods makers .SXQP, miners .SXPP, automakers .SXAP and banks .SX7P leading declines.

The benchmark index closed down 0.8%, with trading volumes thin because of a U.S. market holiday. The index logged a 2% weekly gain.

Hopes of a COVID-19 vaccine and signs of the global economy recovering from the health crisis supported markets this week, but investors have become less optimistic about further gains as the United States set a new daily global record for COVID-19 cases on Thursday.

“The fear of another big(ger) drop in equity prices continues to haunt financial markets. The opportunity to engage in European assets also seems a bit limited,” Thomas Flury, head of FX Strategies at UBS Global Wealth Management wrote to clients.

“For this, clearer signs of a recovery in international trade should be visible. The data on this is constructive, but not surprising to the upside.”

A private survey showed that China’s services sector expanded at the fastest pace in over a decade in June as the easing of lockdown measures revived consumer demand, though companies continued to shed jobs.

A final reading of euro zone business activity showed a coronavirus-inflicted plunge eased sharply last month as more businesses reopened and people ventured out.

But there are doubts about the pace of the recovery with some countries in Europe reimposing restrictions due to a surge in COVID-19 cases.

In France, President Emmanuel Macron named Jean Castex, a top civil servant and local mayor who orchestrated the country's coronavirus lockdown exit strategy, as his new prime minister as he acted to win back voters. France's CAC 40 .FCHI ended down 0.8%, in-line with the broader markets.

Among individual movers, Germany's Delivery Hero DHER.DE rose 4.7% after the takeaway food company said its order growth nearly doubled in the second quarter.

France's utility firm EDF EDF.PA jumped 5.6% after it revised upwards its 2020 nuclear output target.

UK retailer Next NXT.L fell 4.6% after Goldman Sachs downgraded the stock to "sell", while Primark-owner AB Foods ABF.L slipped 0.9% after the U.S. bank downgraded its stock to "neutral".

Reporting by Sruthi Shankar in Bengaluru; Editing by Devika Syamnath, Sriraj Kalluvila and Jane Merriman

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