Europe: Eurozone blue-chips slide on China weakness, rate worries

EUROZONE blue-chip stocks fell on Wednesday (Jul 5) as tech shares were pressured ahead of US Federal Reserve’s minutes from the June policy meeting, while weak data from the single-currency bloc and China stoked fears of a sharp hit to global growth.

The Euro Stoxx 50 index closed 0.9 per cent lower, its worst session since the end of May, while the broader Stoxx 600 dropped 0.7 per cent.

China’s services activity expanded at the slowest pace in five months in June, a private-sector survey showed, piling on to a raft of data signalling weakness in the world’s second-largest economy after the pandemic.

Further hurting sentiment was data that showed euro zone business activity slipped into contractionary territory. Services activity in major European economies was also hit, with France’s dominant services sector falling in June for the first time since January.

“Expectations for China’s economic reopening were arguably too high at the start of the year,” Russ Mould, investment director at AJ Bell, said. “It’s now clear this (recovery) is going to be more of a slow-burner recovery than wads of money suddenly sloshing around.”

Miners fell 1.1 per cent as global growth concerns hurt metal prices, while China-exposed luxury firm LVMH, which is Europe’s most valuable company, was down 1.1 per cent.

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Prudential, which also has exposure to China, slipped 3.9 per cent.

Citigroup cut its 2023 economic growth forecast for the euro area, citing pressures from a high interest rate environment as the ECB signalled further hikes.

Later in the day, the US Fed will release minutes of its latest monetary policy meeting when it kept interest rates unchanged but signalled it could hike rates again in the future.

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“The general consensus is that the central bank has not finished raising rates, despite pausing last month,” Mould added.

Insurers fell 1.9 per cent, hurt by comments from Italy’s economy minister, Giancarlo Giorgetti, who urged the need for industry rules to avoid any further crisis similar to that of Italian life insurer Eurovita.

The technology sector dropped 1.4 per cent, as shares of Swiss sensor maker AMS Osram fell 13.5 per cent, clocking its worst day since February on concerns that China’s export curbs on gallium could negatively affect its supply chain.

Automakers were among rare gainers, up 0.5 per cent, as Sweden-based Volvo Cars rose 0.4 per cent after reporting a 33 per cent year-on-year rise in June sales volume.

Evotec rose 2.7 per cent as the German biotech firm won a US$74 million contract with the US Department of Defence (DoD) to develop drugs targeting orthopoxviruses. REUTERS