European Stocks Close Lower

European stocks settled lower on Tuesday as concerns about growth due to the surge in coronavirus cases and fresh lockdown measures in several countries across the continent weighed on sentiment.

Investors also weighed the prospects of the Federal Reserve hiking interest rates by mid 2022, after U.S. President Joe Biden’s decision to nominate Jerome Powell for another term as the Federal Reserve Chairman.

Investors were also betting on the European Central Bank beginning to hike interest rates next year following comments from some officials of the central bank that inflation is unlikely to ease to the expected extent.

ECB policymaker Francois Villeroy de Galhau, said on Monday that the central bank is “serious” about ending its emergency bond-buying program in March and may not need to expand regular asset purchases to cover the shortfall.

Separately, board member Isabel Schnabel said today that the risks to inflation are skewed to the upside and that plans to end pandemic emergency bond buys remain valid.

The pan European Stoxx 600 declined 1.28%. Germany’s DAX shed 1.11% and France’s CAC 40 declined 0.85%, while the U.K.’s FTSE 100 edged up 0.15%. Switzerland’s SMI ended 1.15% down.

Among other markets in Europe, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Norway, Portugal and Sweden ended with sharp to moderate losses. Austria, Ireland and Spain edged down marginally.

Czech Republic, Poland, Russia and Turkey closed higher.

In the UK market, Compass Group climbed 5.7%. CRH, BHP Group, Rio Tinto, Barratt Developments, IAG, Associated British Foods, BP, Royal Dutch Shell, M&G, HSBC Holdings, Kingfisher, Unilever and Evraz gained 1 to 3.5%.

Halma and Ocado Group declined 5.7% and 4.8%, respectively. Spirax-Sarco Engineering, Hargreaves Lansdown, Segro, Polymetal International, BT Group, Scottish Mortgage, Ferguson and Croda International shed 2 to 5%.

In the French market, STMicroElectronics, Dassault Systemes, Teleperformance, Essilor, Capgemini and Legrand lost 2 to 4%. Faurecia, Renault, Hermes International, LOreal, LVMH and Publicis Groupe also ended notably lower.

Airbus, Unibail Rodamco, Vinci, Sodexo, Thales and Danone posted moderate gains. Orange’s shares moved higher after the company’s subsidiary Orange Belgium announced it was selected by Nethys to enter into exclusive negotiations for the acquisition of 75% of the capital minus one share of VOO SA.

In Germany, E.ON, Infineon Technologies, Zalando, Sartorius, Deutsche Wohnen, Vonovia and Deutsche Post shed 3 to 4.2%. Merck, Adidas, HelloFresh, SAP, Siemens, Siemens Healthineers, Volkswagen and Daimler ended lower by 1 to 2.7%.

German steelmaker ThyssenKrupp plunged 6% on news that Swedish activist fund Cevian is placing a 6.9% stake in the firm.

Deutsche Bank gained nearly 3%. BASF, Bayer, HeidelbergCement, Munich RE and MTU Aero Engines also closed higher.

Swiss chemicals group Clariant AG shed about 2.8% after it set out new mid-term targets.

In economic news, flash survey results from IHS Markit showed the UK private sector expanded more than expected in November, albeit the pace of expansion slowed marginally from October. The composite output index registered 57.7 in November, down fractionally from 57.8 in October. Economists had forecast the index to fall sharply to 54.1.

Service sector growth outpaced the manufacturing recovery in November, although the latter saw its strongest expansion for three months. The services Purchasing Managers’ Index dropped to 58.6 in November from 59.1 in the previous month. The expected reading was 54.6. Similarly, the manufacturing PMI came in at 58.2 versus 57.8 a month ago. The score was forecast to fall to 56.3.

France’s private sector growth accelerated to a four-month high in November driven by strong expansion in services, while manufacturing production registered back-to-back declines, flash survey data from IHS Markit showed on Tuesday.

The final composite output index advanced unexpectedly to 56.3 in November from 54.7 in October. The score was forecast to drop to 53.6.

The services Purchasing Managers’ Index rose to a 46-month high of 58.2 from 56.6 in the previous month, while the manufacturing PMI posted 54.6 in November, up from 53.6 in October.

Germany’s private sector grew at a faster pace in November, although the upturn was only moderate amid subdued manufacturing growth, flash survey results from IHS Markit showed on Tuesday.

The composite output index climbed to 52.8 in November from 52.0 in the previous month. The reading was forecast to fall to 51.0.

The manufacturing Purchasing Managers’ Index dropped to 57.6 from 57.8 a month ago, the services PMI improved to 53.4 from 52.4 in October.

U.K. interest rates would have to be raised if the labor market stays tight, Bank of England Policymaker Jonathan Haskel said on Tuesday. Markets widely expect the BoE to hike its rate in December as inflation remains high and the labor market continues to strengthen.

Market Analysis