Europe: Stocks hit 2-month lows as travel, tech fall

EUROPEAN shares hit two-month lows on Monday, led by sectors including travel and leisure and technology as a mix of worries over prolonged Covid-19 curbs in China and surging bond yields fuelled selling pressure. The pan- European Stoxx 600 index shed 2.9 per cent to touch its lowest since March 8, with travel and leisure stocks falling 6.0 per cent. Tech stocks dropped 5.0 per cent to November 2020 lows as US and European government bond yields surged to multi-year highs on bets for faster interest rate hikes aimed at taming a surge in inflation. Hawkish policymaker Robert Holzmann said over the weekend the European Central Bank should hike interest rates as many as three times this year to combat inflation. Miners were also afflicted, falling 4.4 per cent as Chinese iron ore futures plunged as much as 7 per cent on concerns about demand in the world’s second-largest economy after data showed April export growth slowed to single digits. The benchmark Stoxx 600 has shed over 5 per cent so far in May, as China’s Covid-19 curbs, aggressive monetary policy tightening and the Ukraine war stoke concerns of a global economic slowdown. The index is down 15.6 per cent since hitting an all-time high in January. Investors also awaited inflation readings from the United States in the week, with Wall Street’s S&P 500 index and Dow Jones hitting fresh 2022 lows on Monday. “With a fresh set of tasty inflation numbers due out from a whole host of countries this week, including the U.S., investors are still very much in the sell camp,” said Danni Hewson, financial analyst at AJ Bell. “Talk of recession is rife as markets really begin to price in a series of interest rate rises as central banks remain under pressure to help people out of the cost-of-living crisis they’ve found themselves slap bang in the middle of.”

Adding to the gloom, investor morale in the euro zone fell in May to its lowest level since June 2020, as the impact of the war in Ukraine on Europe’s largest economy becomes increasingly clear. “The positive effects of the good Q1 reporting season and activity reopenings could be short-lived,” Michele Morganti, senior equity strategist at Generali Investments said in a note. Of the nearly 60 per cent of European companies that have reported results so far, 72 per cent have topped analysts’ profit estimates, as per Refintiv IBES data. In a typical quarter, 52 per cent beat estimates. Dutch postal firm PostNL slumped 12.9 per cent after it cut its full-year forecast. BBVA gained 0.7 per cent after Deutsche Bank upgraded the stock to “buy”. REUTERS