Europe: Shares edge higher on defensive lift, weak China data stokes worries

EUROPEAN shares hovered near two-month highs on Monday as signs of a slowing Chinese economy prompted investors to turn to defensive sectors such as healthcare and consumer staples typically seen as immune to business cycles.

The pan-European Stoxx 600 rose 0.3 per cent.

The benchmark index was trading close to levels needed to recoup all of its June losses when fears about aggressive US interest rate hikes and recession dominated the sentiment. Healthcare stocks were among the biggest boost to European bourses on Monday.

AstraZeneca rose 2.3 per cent after the drugmaker said its cancer drug, Enhertu, developed with Japan’s Daiichi Sankyo delayed the progression of a form of advanced breast cancer in previously treated patients.

Food and beverage rose about 1 per cent to lead gains, while utilities added 0.8 per cent.

Those gains helped counter losses in China-exposed automakers, oil and miners after the country’s central bank cut key lending rates in a surprise move to revive demand as data showed the economy unexpectedly slowing in July.

“Volatility in Europe is baked in for the rest of the year, given the Ukraine war, China’s zero-Covid-19 policy, inflation, and whether central bank hikes manage to tame things to a point where investors feel confident,” said Danni Hewson, financial analyst at AJ Bell.

Investors await euro zone flash GDP and HICP inflation numbers due this week, as well as retail sales data from the US due on Wednesday.

“People are waiting to find out what inflation is doing to the consumer purse – we’re likely to get real insight this week into how the consumer is faring and today is a deep breath before the storm,” Hewson added.

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Meanwhile, German wholesale prices fell by 0.4 per cent in July compared with the previous month, the first decline since Oct 2020, the Federal Statistical Office reported.

Euro zone government bond yields fell on concerns of a possible recession.

European stock markets have rallied off their June lows, echoing an upbeat sentiment on Wall Street, as signs that US inflation may have peaked encouraged investors to scale back bets of aggressive rate hikes by the Federal Reserve.

The Stoxx has climbed over 10% since hitting a year low in June, but remains down 9.3 per cent for the year.

Among other stocks, HelloFresh jumped 2.7 per cent after the German meal-kit maker said it could still achieve its earlier 2022 outlook despite cutting the forecast last month.

Henkel added 0.5 per cent as the consumer goods group raised its outlook for organic sales growth in fiscal 2022. REUTERS