Positive week dampened by weak data

European stocks ended lower on Friday, closing out another lacklustre week as business activity in the euro zone shrank in January after stringent lockdowns to control the coronavirus pandemic shuttered many businesses.

The pan-European STOXX 600 index fell 0.6% but clung to a small 0.2% rise for a week, dominated by hopes for massive U.S. stimulus under President Joe Biden.

Travel and leisure stocks fell 2.5%, leading declines among sectors amid concerns over fresh travel restrictions in Europe. Other economically sensitive sectors like banks, oil & gas and mining shed more than 1%.

IHS Markit’s flash composite Purchasing Mangers’ Index (PMI) for the euro zone fell further below the 50 mark separating growth from contraction, hitting 47.5 in January from December’s 49.1. The bloc’s dominant service industry was hit hard with hospitality and entertainment venues forced to remain closed, but manufacturing remained strong as factories largely stayed open.

The sealing of a post-Brexit trade deal, unprecedented stimulus measures from central banks and governments, and hopes that COVID-19 vaccines will spur a faster economic rebound drove the STOXX 600 to a near 11-month high this week.

A European Central Bank survey showed the euro zone economy is likely to rebound this year - but at a slower pace than expected only a few months ago - before making up the lost ground in 2022.

Germany’s Lufthansa, Air France and British Airwaysowner IAG fell between 2.5% and 3.4%, while holiday group TUI tumbled 17.2% after the European Union proposed to label hotspots of COVID-19 infections as “dark red” zones.

Travellers from those areas will have to take a test before departure and undergo quarantine. The UK’s FTSE 100 fell 0.3% and midcap stocks slid 1.0% after Britain’s retail sales marked a weak end to their worst year on record in December, while business activity contracted sharply in the latest month.