Europe: Shares slip as macro gloom weighs; luxury stocks rebound

EUROPEAN stocks slipped on Thursday (May 25) as concerns over the US debt ceiling standoff and a global economic slowdown resurfaced and outweighed initial optimism from upbeat corporate earnings, while luxury stocks stabilised after a bruising selloff.

The pan-European Stoxx 600 index closed 0.3 per cent lower, shedding about 2.7 per cent in three consecutive days, knocked down by recent losses in luxury stocks and lack of progress in talks to raise the US debt ceiling and avert a default.

A media report said that US House Speaker Kevin McCarthy does not know if congressional and White House negotiators will be able to reach a deal on raising the debt limit on Thursday, renewing fears of an unprecedented default in the United States.

“The US debt ceiling is the headline at the moment – the uncertainty that it is bringing to the markets is incredibly difficult to navigate,” said Helen Jewell, deputy chief investment officer at BlackRock Fundamental Equities for EMEA.

European stocks came under strong selling pressure this week as investors fretted over a potential US debt default and sticky inflation in the UK after a strong earnings season had boosted several regional bourses to record highs.

Weighing the most were declines in energy stocks on a slide in crude oil prices, while luxury majors took a breather and helped stave off steeper losses on the Stoxx 600.

“Luxury stocks can weather a recession because high net worth individuals tend to purchase these ... so if the stocks see a deeper dip, I would see that as a potential value buy,” said Giles Coghlan, chief market analyst at HYCM.

Further, technology was the top performing sector on a boost from European chipmakers after the world’s most valuable chipmaker Nvidia forecast quarterly revenue more than 50 per cent above estimates, and said it is boosting supply to meet surging demand for its artificial intelligence (AI) chips.

Shares of BE Semiconductor jumped 7.6 per cent, while ASM International rose 8.6 per cent and ASML Holdings added 5 per cent. Bank of America analysts see both ASM and ASML as beneficiaries of growing AI adoption.

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Europe: Shares log worst day in two months on UK inflation shock, debt ceiling concerns

Germany’s DAX slipped 0.3 per cent after data showed Europe’s biggest economy contracted in the first quarter of 2023, compared with the previous three months, thereby signalling a recession.

Cineworld slumped 8.2 per cent even as the British cinema chain operator said it expects to emerge from Chapter 11 bankruptcy protection in July.

On the flip side, GN Store Nord was among the top gainers on the Stoxx 600, with an 11 per cent advance after a successful private placement of shares. REUTERS