Europe: Stocks hit 1-month low as Trump tweet adds to economic worries

[BERLIN] European shares sank to a one-month low on Thursday, hit by underwhelming earnings reports, a dire reading of the German economy's health and US President Donald Trump raising the possibility of delaying November's presidential election.

The pan-European STOXX 600 index closed 2.2 per cent lower, erasing all its gains for the month, while Germany's DAX slumped 3.5 per cent, leading regional losses.

Risk assets across the globe sold off sharply after Trump tweeted "delay the election until people can properly, securely and safely vote???", although the US constitution bestows that power on Congress.

Growth-sensitive sectors like banks, insurers , automakers and energy firms bore the brunt of the sell-off in Europe, falling between 3.5 per cent and 4.3 per cent.

European equities had already fallen after a preliminary reading showed Germany's gross domestic output shrank by 10.1 per cent in the second quarter, worse than the 9 per cent contraction predicted by economists in a Reuters poll as the Covid-19 pandemic took its toll.

"Germany's record drop in gross domestic product fuels extra concern that the rest of Europe might have a deeper slump," Edward Moya, a senior market analyst at Oanda, wrote in a note.

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The data had investors worried that an economic recovery from coronavirus crisis might take longer than expected, with numbers from the United States sparking similar concerns.

About 40 per cent of the companies listed on the STOXX 600 have reported second-quarter earnings so far, and 64 per cent of those have surpassed beaten-down profit expectations, according to Refinitiv data.

However, there were a slew of disappointments on Thursday, with Britain's Lloyds Banking Group falling 7.6 per cent as it swung to a rare pretax loss in the first half and Spain's BBVA dropping 8.1 per cent as it reported a near 50 per cent decline in net profit.

Automakers also took a hit as Germany's Volkswagen unveiled a first-half operating loss and slashed its dividend, while France's Renault posted a record net loss of 7.29 billion euros (S$11.82 billion) in the first half of the year.

"When companies report in-line or quasi in-line numbers, that's no longer good enough for the markets to reward them," said Maarten Geerdink, head of European equities at NN Investment Partners.

Among the bright spots, Anheuser-Busch InBev gained 1.4 per cent after saying it was encouraged by a global beer sales recovery in June.

British drugmaker AstraZeneca rose 1.6 per cent as it backed its 2020 forecasts.

REUTERS