Europe: Growth and trade nerves grind shares down to 2-week low

[LONDON] Worries about US bond markets signalling an impending recession, and still rumbling trade war between the world's top two economies, saw European shares sink further on Wednesday after a 3 percent drop on Wall Street the previous day.

The pan-European Stoxx 600 ended down 1.2 per cent at its lowest level since Nov 23. The euro zone stock index and Germany's DAX also fell 1.2 per cent. US stock markets were shut on Wednesday for a day of mourning in honour of former president George H.W. Bush who died last week.

Cyclical sectors like construction and miners posted the biggest falls, down 2.2 and 1.8 per cent respectively, as investors dumped stocks highly sensitive to economic growth.

"Cyclicals are really dependent upon accelerations in growth, they're very real economy sensitive for higher revenues," said John Ricciardi, CEO and lead portfolio manager at Kestrel Investment Partners.

The inversion of parts of the US yield curve means investors are beginning to panic about future growth and inflation, Mr Ricciardi added.

Analysts cut their estimates for 2019 earnings growth as markets turned sour this autumn.

Banks also fell, down 0.7 per cent, but losses were limited by a bounce in Italian lenders as Italian government bond yields continued to fall sharply on hopes that Rome could cut its budget spending plans.

Tech stocks fell 1.8 per cent after the highly valued US tech sector sold off.

Chipmakers AMS, STMicroelectronics and Infineon fell 2.3 per cent to 6.1 per cent following a sharp drop in chip stocks on Wall Street overnight.

German carmakers slightly outperformed the DAX as investors digested what seemed a relatively positive outcome from a meeting of auto executives at the White House.

US President Donald Trump pressed carmakers to increase investments in the United States, something the executives said they planned to do but wouldn't be able to if the administration went ahead with threatened tariffs.

White House economic adviser Larry Kudlow, among those in the meeting, said he did not think that car tariffs were imminent.

Daimler and BMW and Volkswagen all fell less than 0.9 per cent.

Shares in valve manufacturers Rotork and Weir, which supply the oil industry, tumbled after US energy services firm Schlumberger warned on Tuesday, that a drop in fracking activity would hit its North America revenues.

Swedish pharma firm Elekta was a rare gainer, up 3.5 per cent after it won Food & Drug Administration clearance for its "Unity" radiation therapy, clearing it for commercial sales and clinical use in the United States.

M&A news was also a driver.

Shares in Shire jumped 3 per cent after shareholders of Japan's Takeda approved the takeover of the London-listed pharmaceutical firm.

Among small-caps, Swedish retailer Clas Ohlson provided the latest example of the squeeze on the sector to close physical stores as shoppers switch to online purchases.

Its shares opened down 5 per cent but swung back to end up 6.4 per cent as investors welcomed its new strategy including closures of loss-making stores in Britain and Germany.

Broker notes hit some stocks. Hargreaves Lansdown fell 4.4 percent after Morgan Stanley cut its rating to underweight.

Saint Gobain shares fell 3 per cent, the worst performer on the CAC 40, after JP Morgan cut it to "neutral" from "overweight".

Altran shares fell 8 per cent after the company announced its North America chairman Frank Kern will retire.

REUTERS