Europe: Stoxx 600 drops 1% on Mercedes drag; Target outlook weighs on retailers

EUROPE’S Stoxx 600 index snapped a four-day winning streak on Wednesday, led by losses in shares of Mercedes Benz Group, while a dour forecast from US big box retailer Target Corp pressured regional retailers on concerns about consumer spending.

The pan- European stock index index closed 1 per cent down.

Automobile stocks tumbled 3.7 per cent to log their biggest one-day percentage fall in almost seven weeks.

Mercedes Benz slid 6.2 per cent after the premium German carmaker cut prices on some of its EQE and EQS models in China due to changing market demand for top-end electric vehicles (EVs).

“For the ( European) automobile sector this kind of sales impact comes from China’s restrictions and fears of a recession, despite Europe and China having good trade relations,” said Raed Alkhedr, chief market analyst at Equiti.com.

Retailers dipped 3.4 per cent after Target forecast a surprise drop in holiday-quarter sales, blaming surging inflation and “dramatic changes” in consumer spending for a drop in demand for everything from toys to electronics.

Further weighing on UK retailers like Ocado and Marks and Spencer was data that showed British inflation hit a 41-year high of 11.1 per cent - a day before finance minister Jeremy Hunt announces “tough but necessary” tax hikes and spending cuts to control price growth.

A euro zone inflation report for October is due on Thursday.

Meanwhile, global concern that the war in Ukraine could spill across its borders eased after Poland and Nato said a missile that hit a Polish village was probably a stray fired by Ukraine’s air defences and not a Russian strike.

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“It is the worst when we hear such news. Even if it (missile) is not from Russia, this still causes uncertainty in the markets and the European market is especially fragile heading to a confirmed recession next year due to the energy crisis and geopolitical tensions,” Alkhedr said.

Shares of German arms maker Rheinmetall, Italy’s Leonardo, French defence and technology group Thales, Sweden’s SAAB and Britain’s biggest defence company BAE Systems rose between 0.2 per cent and 4.2 per cent.

The Stoxx 600 has dropped 11.8 per cent so far this year and though that is less than the S&P 500 index’s 16 per cent decline, market players remain wary of investing in Europe.

Multiple data points have signalled a euro zone recession amid the European Central Bank’s aggressive monetary tightening cycle to control record-high inflation. MediaForEurope (MFE) dropped 4.1% after Italy’s top commercial broadcaster’s operating profit slumped 65 per cent in the first nine months. Alstom gained 7.2 per cent after the French train maker sharpened annual targets on strong first-half orders and cash flow beat. REUTERS