By Susan Mathew and Amal S
(Reuters) - European shares slipped on Friday, setting up to end an action-packed week on a somber note on worries over the economic impact of a resurgent COVID-19 pandemic and the fate of a Brexit trade deal as well as stalled U.S. stimulus measures.
The pan-European STOXX 600 index slid 0.8%, extending losses after a dour 2021 economic forecast from the European Central Bank had seen it end in the red on Thursday.
The index is set to break a five-week winning streak as a stalemate in talks between the European Union and Britain raised the chances of Britain's exit from the economic bloc without a trade deal.
Investors will be watching for Brexit updates with a Sunday deadline for a last ditch attempt at a deal.
"It's the fears that the talk from both sides has definitely switched to a more negative tone," said David Madden, market analyst at CMC Markets UK, adding markets still hope for some sort of a deal because stocks "aren't falling through the floor."
Drugmaker Sanofi (NASDAQ:SNY)'s 3.1% slide weighed the most, after it said its COVID-19 vaccine candidate developed with GlaxoSmithKline (NYSE:GSK) showed an insufficient immune response in clinical trials. GSK shares were trading flat.
As European bond yields dipped, banks continued their slide. Spain's lender-heavy main index fell 1.9%.
Meanwhile, European Union leaders unblocked a 1.8 trillion euro ($2.18 trillion) financial package late on Thursday to help the economy recover from the pandemic-induced recession.
But in the United States, fiscal stimulus appeared unlikely after Democrat House Speaker Nancy Pelosi suggested that wrangling over a spending package could drag on through Christmas.
A raft of stimulus measures since the onset of the pandemic has lifted sentiment on hopes of a global economic recovery. The STOXX 600 has risen 45% since lows hit in March, but it remains more than 6% down for the year.
Among other individual stocks, Rolls-Royce (OTC:RYCEY) slumped 5.3% after the engineering company downgraded this year's cash outflow forecast and warned the outlook remained challenging.
Telecom gear maker Ericsson (BS:ERICAs) fell to the bottom of the STOXX 600 after filing a U.S. lawsuit against Samsung (KS:005930) for alleged breaches in negotiations for royalty payments and to license patents.
This could impact Ericsson's operating income by 1 billion Swedish crowns ($118.70 million) to 1.5 billion per quarter beginning in the first quarter 2021, the company said.
Europe's telecoms sector dropped 2.3% and was on course for its worst day in over 10 weeks.
($1 = 0.8243 euros)