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European stocks flat as U.S.-China woes weigh, but post weekly gain

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(Reuters) - European shares closed unchanged on Friday although rising U.S.-China tensions hit Asia-exposed banks and luxury stocks, while hopes of a global recovery kept weekly gains intact for the main indexes.

Stock markets had a volatile session as Beijing planned to impose a new security law in Hong Kong, raising prospects of fresh protests in the global financial hub and drawing a warning from U.S. President Donald Trump that Washington would react “very strongly”.

Asia-focused British life insurer Prudential (PRU.L) tumbled 9.3% to the bottom of the pan-European STOXX 600 index , which closed unchanged on the day.

HSBC Holdings Plc (HSBA.L) and Standard Chartered (STAN.L) fell 5% and 2.4% respectively.

Rising tensions between the world’s two largest economies have stalled a recovery in equity markets in recent weeks, with Trump accusing China of mishandling the coronavirus outbreak.

“The U.S. has ratcheted up pressure on China on several fronts and has sapped risk appetite ahead of the weekend,” said Marc Chandler, managing director at Bannockburn Global Forex.

Still, the STOXX erased early losses of as much as 1.7% as media stocks .SXMP gained 1.3% and euro zone banks .SX7E rebounded from record low levels.

Cyclical sectors such as miners .SXPP, travel & leisure .SXTP and automakers .SXAP have outperformed this week, helping the STOXX 600 post its best week since April 10 on hopes that easing of coronavirus-driven lockdowns will spur a swifter economic recovery.

Britain’s Burberry (BRBY.L) rose 3.3% as its chief executive said the company was encouraged by a “strong rebound in some parts of Asia” and is well-prepared to navigate through the COVID-19 situation.

German real estate companies LEG Immobilien (LEGn.DE) and TAG Immobilien (TEGG.DE) rose 0.8% and 6.6% respectively after LEG said the companies were in talks about a potential combination of their businesses.

Oil stocks .SXEP slipped on the back of falling crude prices as China dropped its annual growth target for the first time, stoking concerns of demand in the world’s second-largest oil user.

The oil-heavy Norwegian index .OSEAX fell 1.6%

Luxury goods makers including LVMH (LVMH.PA) and Kering SA (PRTP.PA), which draw a major part of their revenue from China, fell about 2%. Cartier maker Richemont (ROG.S) dropped 4.2%.

Most markets in UK and the U.S. are closed on Monday for public holidays.

Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta, Bernard Orr; Editing by Kirsten Donovan

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