UPDATE 2-Faltering PMIs add to a lacklustre week for European stocks

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* German, French services sectors lose momentum
* FTSE 100 uninspired by surge in UK retail sales
* Ireland's Kingspan jumps on upbeat forecast
* IHG, Accor surge on merger hopes

(Updates to market close)
By Sruthi Shankar
Aug 21 (Reuters) - Downbeat economic data that pointed to a
stalling of the euro zone recovery hit regional stock markets on
Friday, with the pan-European STOXX 600 index marking weekly
losses as coronavirus cases rose across the continent.
The German DAX .GDAXI reversed early gains to trade 0.5%
lower after Purchasing Managers Index (PMI) surveys showed
service sector activity unexpectedly came to a near standstill
in August, although factory activity rebounded further.
Paris-listed shares .FCHI fell 0.3% after a worse showing
from the French survey, while euro zone blue chips .STOXX50E
were down 0.4%. The opening gains proved short-lived, with the wider STOXX
600 index .STOXX falling 0.2%, but firmer trading on Wall
Street on the back of better data helped limit losses into the
close.
"Today's euro zone PMI release confirms that while activity
is on the mend, the pace of the recovery is slowing," Jai Malhi,
a global market strategist at J.P. Morgan Asset Management
wrote. "It's no coincidence that the recovery is losing pace as
concerns over new (coronavirus) infections have risen."
The STOXX 600 recorded a 0.9% loss for the week, with
growth-linked cyclical sectors such as banks .SX7P , oil & gas
firms .SXEP and automakers .SXAP hit hard as several
European countries saw a resurgence in coronavirus cases that
raised fears of more restrictions on business activity.
London's exporter-heavy FTSE 100 .FTSE slipped only 0.2%,
supported by a slump in the pound on a mix of bad news on the
latest Brexit negotiations and gains for the U.S. dollar. GBP/
.L
Travel and leisure stocks .SXTP were the biggest sectoral
gainers, up 3.1%, with France's Accor ACCP.PA and British
rival InterContinental Hotels (IHG) IHG.L surging for a second
day on reports of a possible merger.
Irish building and insulation materials firm Kingspan
KSP.I jumped 8.9% after its chief executive said the company
saw significant pent-up demand post-lockdown. Swiss drugmaker Novartis NOVN.S rose 0.5% after it won
U.S. health regulator's approval to repurpose an 11-year-old
blood cancer drug against multiple sclerosis. Dutch-based payment-processing company Adyen ADYEN.AS fell
3.7% as several top executives each sold 15% of their stakes in
the company, cashing in 693 million euros ($822 million) in all.