MILAN/FRANKFURT: European shares on Wednesday ended off session highs as euphoria over a potential US fiscal stimulus and vaccine optimism subsided, with investors awaiting the outcome of make-or-break Brexit trade talks. The pan-European STOXX 600 index closed at its highest since February but trimmed gains to finish up 0.3%.
London's export-heavy FTSE 100 shaved its 1% jump in the session to end 0.1% higher as the pound firmed ahead of a meeting between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels at 1930 GMT.
The last ditch attempt at a deal to govern around $1 trillion in annual trade comes after talks so far failed. Even as officials sounded skeptical of an agreement just three weeks ahead of Britain's exit from the European Union, analysts held out hope.
Gains in Europe were led by autos, while the tech sector lost, dragged down by a 12% slide in chipmaker STMicroelectronics after it postponed its $12 billion annual sales target by a year to 2023. STM's Paris listed shares also dropped 12% pulling France's main index 0.3% lower.
Eyes on Thursday will also be on the outcome of the European Central Bank meeting with more emergency bond buying and cheap liquidity for banks expected. But analysts at JPMorgan say given asset purchase programs are nearing self-imposed limits, the euro zone may need more fiscal support. The 750 billion euro European Recovery Fund yet to be agreed on might still prove insufficient to generate a return to pre-pandemic GDP levels in 2021, they said.
Among other individual stocks, lighting company Signify NV, slid 4.2% after a downbeat revenue forecast. Greek stocks rose 0.6%, up for the 14th straight session, their longest winning streak ever.
"While one should not expect ... Johnson to make any inroads with Von der Leyen tonight . the addition of respective negotiators Frost and Barnier to the guest list is a positive signal," said Oliver Brennan, senior macro strategist at TS Lombard.
"We retain our view that in the end, a (free trade agreement) is inevitable."
Failure to secure a deal would clog borders, upset financial markets and disrupt delicate supply chains across Europe and beyond Germany's DAX closed up 0.5%, but retreated from a three-month peak.
Data showed German exports rose less than expected in October, but foreign trade still gave Europe's largest economy a boost at the start of the fourth quarter as it struggles to avoid slipping into a double-dip contraction.