European shares falter as year-end rally fades

(For a live blog on European stocks, type LIVE/ in an Eikon
news window)
* Investors book profits after record-setting December rally
* Caution sets in about trade progress in 2020 - analysts
* Benchmark European index still set for best year since
2009
* France's Latecoere gains on deal to buy Bombardier unit

By Sagarika Jaisinghani
Dec 31 (Reuters) - European shares looked set to end the
decade with a whimper on Tuesday as investors locked in gains
after a record rally that was fuelled by optimism around trade
and easing fears of a global recession.
In a shortened session ahead of the New Year's Eve
celebrations, the pan-European STOXX 600 index .STOXX shed
0.3%.
French .FCHI , British .FTSE and Spanish .IBEX stocks
lost between 0.4% and 0.8%, while Frankfurt and Milan bourses
were shut for the year-end holidays.
"While market volumes are predictably light, investors
continue to strike a year-end cautionary tone as December
optimism is gradually giving way to 2020's uncertainty," Stephen
Innes, a market strategist at AxiTrader, wrote in a note.
Global equities notched multiple record highs in December as
investors cheered a breakthrough in U.S.-China trade
negotiations and signs of a smoother Brexit. MKTS/GLOB
The upbeat mood, coupled with robust economic data and a
relatively loose monetary policy by the world's most influential
central banks, have set the benchmark European index on course
for its biggest annual gain since the global financial crisis.
But with the finer details about the Phase 1 trade deal not
yet known, analysts say scepticism is building around how long
the truce will last.
"Once the (Phase 1) deal is signed, investors will then
press to consider ... how much more progress can be
realistically expected ahead of the US elections next year,"
Innes said.
For European investors, Brexit clouds are gathering again.
Although Britain's exit from the European Union is now
almost certain on Jan. 31, Prime Minister Boris Johnson's hard
line on the country's future trade relationship with the bloc
has again fanned fears of a no-deal Brexit.
Traders will also be looking at Germany for concrete signs
of economic growth, after Europe's powerhouse teetered on the
brink of recession this year.
Despite equities in the country being highly sensitive to
trade progress, German shares rose only 0.1% in December, widely
underperforming their regional peers.
For the year, the STOXX 600 rose about 23%, but lagged both
the wider MSCI world index .MIWD00000PUS and the benchmark S&P
500 .SPX .
In thin corporate news on the final trading day of the year,
French aeronautics group Latecoere LAEP.PA gained 1.7% after
agreeing to buy Bombardier's BBDb.TO electrical wiring
interconnection system business for around $50 million.