Europe: Global growth worries keep a lid on shares, chaotic Brexit looms

[BENGALURU] European shares inched lower on Wednesday as worries of a looming global recession kept investors from making bold bets, while a dive in the pound over fears of a disorderly Brexit pushed British stocks higher.

The pan-European Stoxx 600 index ended 0.2 per cent lower paring deep losses from the morning, helped by London's exporter-heavy FTSE 100 as sterling tumbled after Prime Minister Boris Johnson announced plans to suspend parliament.

Mr Johnson's move, approved by Queen Elizabeth, limits the British parliament's ability to derail his Brexit plans, stoking fears of an economically disruptive no-deal departure from the European Union on Oct 31.

"Although he is using normal parliamentary procedure, what's different is the accusation that it is a device to limit the ability of those who oppose a no-deal Brexit to debate and plan," said Ken Odeluga, market analyst at City Index in London.

UK house-builders were the hardest hit on worries that a hard Brexit would damage the British economy. Persimmon, Berkeley, Barratt Developments and Taylor Wimpey were the biggest decliners on the FTSE 100, down 3 per cent to 5 per cent.

Dublin stocks sensitive to Brexit news fell 1.3 per cent with Irish low-cost carrier Ryanair falling nearly 2 per cent.

The picture was more mixed for the rest of Europe, with Germany's trade-sensitive DAX ending lower, but bank-heavy Madrid stocks finishing in the positive territory.

Milan stocks ended flat, reversing earlier losses as Italy appeared to be nearing the end of its latest political turmoil with the opposition Democratic Party (PD) saying it was ready to form a coalition with the 5-Star Movement.

A majority of European sub-sector indexes fell, with technology stocks down 1 per cent after a forecast cut from US software company Autodesk Inc.

Danish companies were at extreme ends of the Stoxx 600 index. Brewer Royal Unibrew was up 10 per cent on higher-than-expected second-quarter results and an upbeat outlook, but jeweller Pandora slumped 6 per cent after Tiffany & Co warned of the potential impact from ongoing protests in Hong Kong.

RECESSION FEARS

A deep inversion in the US Treasury yield curve rattled investors about a possible global recession in the face of a US-China trade war. Bond prices in the United States later trimmed earlier gains after Wall Street's major indexes turned positive.

"While the US economy remains relatively strong, the yield curve may in fact be serving its traditional function of not reflecting just the US economy but reflecting the prospects of the global economy as well," said Mr Odeluga.

Bond market gains were still intact across the euro zone, with Germany's 10-year bond yields at a fresh record low.

A sharp escalation in the tariff war between the world's two largest economies is putting an increasing strain on the global economy with the Stoxx 600 on track to end August lower.

REUTERS