Europe: Shares fall as weak China, eurozone data dents appetite

EUROPE shares fell on Tuesday (Sep 5) as weak services sector data from China and the eurozone fuelled concerns about slowing global growth, though gains in energy stocks helped crimp losses.

The pan-European Stoxx 600 index ended the session 0.2 per cent lower, logging its fifth consecutive session of declines, though well off its week-low hit intraday.

China-exposed sectors such as luxury and construction & materials were among the top drags, falling 1.2 per cent and 1.0 per cent, respectively, as data showed China’s services activity expanded at the slowest pace in eight months in August.

Separately, the decline in eurozone business activity accelerated faster than initially thought last month as the dominant services industry fell into contraction, according to a survey which suggests the bloc could fall into a recession.

“The ECB (European Central Bank) has some wiggle room to operate because we haven’t gone into recessionary territory yet,” said Mobeen Tahir, director, macroeconomic research & tactical solutions at WisdomTree.

“It can give itself that opportunity to hold rates at a higher level for longer until inflation is completely stamped out.”

Money markets are pricing an about 26 per cent chance of a 25 basis-point (bps) rate hike at the Sep 14 meeting, easing from around 30 per cent before the PMI data.

Separately, an ECB survey showed consumer expectations for eurozone inflation in the coming years edged up, likely adding to worries that the decline in price growth could stall above the bank’s target.

Eurozone bond yields climbed to near two-week highs. Real estate stocks fell 0.3 per cent, while the personal and household goods sector lost 0.9 per cent.

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Retailers eased 0.4 per cent after JP Morgan downgraded food retailers, citing the prospect of grocery pricing deflation. Denmark’s Koninklijke Ahold Delhaize dropped 6.1 per cent, weighing on the Stoxx 600.

Helping stem losses, Europe’s energy sector jumped 1.2 per cent, tracking a more than 1 per cent spike in crude prices after Saudi Arabia and Russia announced a fresh extension to their voluntary supply cuts.

Industry data showed new car registrations in Britain rose for the 13th consecutive month in August. European automakers gained 1.0 per cent.

Among individual stocks, Sectra tanked 12.7 per cent after the Swedish technology company posted first-quarter results, with analysts saying earnings growth lags sales development.

Credit Agricole lost 2.0 per cent after Goldman Sachs downgraded the French bank to “sell”, while Commerzbank slid 6.1 per cent as Barclays cut its rating on the German lender’s stock to “underweight”.

Roche fell 1.5 per cent after Berenberg downgraded the Swiss pharmaceuticals firm to “hold” from “buy”. REUTERS