By Sruthi Shankar
(Reuters) - European shares closed a sliver away from all-time highs on Monday, as a slide in eurozone banks countered optimism over the U.S.-China trade deal and a stellar run for UK shares.
With trading volumes dwindling as investors leave on Christmas holidays, analysts warn that market action could be volatile. The pan-European STOXX 600 index (STOXX) saw trading volume down to 63% of its thirty-day moving average on Monday.
The index closed flat after hitting a new record earlier in the session, aided by a ninth straight day of rise for Britain's FTSE 100 (FTSE) and defensive buying that boosted Europe's healthcare stocks (SXDP) and Swiss equities index (SSMI).
"Unsurprisingly, there has not been much news to drive the market forward, but hopes of a U.S.-China deal continue to be dangled like a carrot in front of investors," Chris Beauchamp, chief market analyst at IG wrote in a client note.
U.S. President Donald Trump on Saturday said Washington and Beijing would "very shortly" sign their so-called Phase One trade pact.
Giving investors more reason to cheer, China's finance ministry said on Monday it would lower tariffs next year on U.S. products ranging from frozen pork and avocado to some types of semiconductors.
However, trade-sensitive German (GDAXI) and French (FCHI) shares moved little on the news. The star performers were UK mid-cap shares (FTMC), which jumped 0.8% and the blue-chip index (FTSE), which gained 0.5%, as investors stuck to hopes that Britain will exit the European Union by 2020.
NMC (L:NMC), whose shares have nearly halved in value since last week after Muddy Waters criticised the healthcare group's financials, shot up 37% after launching an independent review of its books.
Shares in aerospace parts makers such as Senior Plc (L:SNR), Melrose Industries (L:MRON) and Meggitt (L:MGGT) rose between 1.3% and 2.8% after U.S. planemaker Boeing Co (N:BA) ousted Chief Executive Dennis Muilenburg following a production halt of its best-selling 737 MAX jetliner after two fatal crashes.
Eurozone banks (SX7E) dropped about 1%. European Central Bank's (ECB) governing council member Klaas Knot said interest rates in the euro zone could remain historically low for years, but the ECB's ultra-loose monetary policy risks becoming counterproductive.
A 4.9% decline for Italian infrastructure group Atlantia (MI:ATL) pressured the wider country index (FTMIB).
On Saturday, a report said the Italian government had provisionally approved a document to make it easier to revoke concessions to operate motorways. The decree does not mention Atlantia, but a government source told Reuters that the measures could be applied to it.
Lufthansa (DE:LHAG) dropped 1.3% after German cabin crew union UFO said arbitration talks with the company had failed and its members could stage strikes any time from now on, barring Dec. 24, 25 and 26.