Europe: Shares pare gains on economic fears, Swiss stocks outperform on Roche boost

EUROPEAN shares closed off their day’s highs on Wednesday (Aug 23) on growing evidences of slowing economic activity in the continent, while strong gains in drugmaker Roche boosted the Swiss stock index to a one-week high.

The pan-European Stoxx 600 closed 0.4 per cent higher, after gaining as much as 0.8 per cent to a one-week high intraday.

A survey showed deeper-than-expected downturn in eurozone business activity this month in a broad-based fall, particularly in Europe’s largest economy Germany, although prompting traders to firm up bets that the European Central Bank (ECB) would pause hiking rates in September.

“Having bad economic numbers is never a good scenario, even if it means central banks might go a bit easier,” said Michael Field, European equity strategist at Morningstar.

Figures showed eurozone consumer confidence fell by 0.9 points in August from July.

The benchmark Stoxx 600 is set for its worst monthly decline this year. It has underperformed US benchmark S&P’s 500 by over 15 per cent year-to-date advance with a near 7 per cent up move, on concerns over the weakening economic outlook for the eurozone and major importer China and rising bond yields on fears of rates remaining higher for longer globally.

“We need something solid like if some of Europe’s major economies can avoid recession, although a big question, but beyond that, there’s not much that can inject a boost of optimism into markets to bring us back to higher levels,” Field added.

Energy stocks dropped 1.1 per cent tracking lower crude oil prices, while Puma, Adidas and JD Sports Fashion dropped between 3.3 per cent and 5.4 per cent, tracking US-based Foot Locker’s lower annual forecasts on weaker demand amid still-high inflation.

Meanwhile, the Swiss Market Index added 0.9 per cent, with Roche jumping 3.8 per cent after inadvertently publishing positive lung cancer drug trial data from an interim analysis, although more data will be needed to confirm efficacy.

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Novo Nordisk, too, gained 2.7 per cent, aiding a 1.1 per cent gain in the healthcare sector.

Reuters reported the Denmark-based healthcare firm hired Thermo Fisher as its second contract manufacturer for its hugely popular weight-loss drug Wegovy.

German 10-year bund yields, considered Europe’s benchmark, eased, while rate-sensitive real estate stocks added 2.1 per cent.

This week’s centrepiece is the Jackson Hole Symposium, where speeches by ECB president Christine Lagarde and Federal Reverse chair Jerome Powell will be scanned for monetary policy outlook.

Bavarian Nordic surged 8 per cent to the top of Stoxx 600 after the Danish biotech company beat second-quarter revenue expectations.

Second-quarter earnings for European firms are now estimated to have fallen 5 per cent, slightly higher than the 4.6 per cent drop estimated last week, Refinitiv data showed. REUTERS