European Markets Close Higher As Stocks Recover After Early Struggle

European stocks shrugged off early uncertainty and moved higher on Monday with investors digesting some regional economic data and closely following the political developments in several countries.

Eurozone business activity contracted more than expected in September, with the corresponding PMI falling to 48.9 from 51.0 as both services and manufacturing sectors weakened.

Similarly, growth softened across U.K. businesses in September.

In political news, German Chancellor Olaf Scholz’s Social Democratic Party (SPD) has narrowly beaten the far-right Alternative for Germany (AfD) in an election in the east German state of Brandenburg, according to official results released this morning.

In France, Prime Minister Michel Barnier said his new government could increase taxes for big business and the wealthiest to help tackle the budget deficit.

Elsewhere in the U.K., Finance Minister Rachel Reeves said there would be no return to austerity or widespread cuts despite financial challenges.

The pan European Stoxx 600 climbed 0.4%. The U.K.’s FTSE 100 gained 0.36%, Germany’s DAX ended 0.68% up, and France’s CAC 40 edged up 0.1%. Switzerland’s SMI closed 0.26% up.

Among other markets in Europe, Belgium, Finland, Greece, Iceland, Netherlands, Norway, Poland, Portugal, Russia, Spain and Sweden ended higher.

Austria, Denmark and Turkiye closed weak.

In the UK market, Endeavour Mining, Antofagasta, Prudential, Marks & Spencer, Associated British Foods, Experian, Glencore, Kingfisher, HSBC Holdings, Haleon, Fresnillo, Imperial Brands, JD Sports Fashion, BT Group, Smiths Group, Diageo and Segro gained 1.3 to 2.5%.

B&M European Value Retail, Smith (DS), Barclays Group, Hikma Pharmaceuticals, Halma, IAG, Easyjet and Ashtead Group lost 1 to 2.5%.

AstraZeneca declined sharply after the British drug maker said the overall survival in the TROPION-Breast01 Phase III trial of datopotamab deruxtecan did not achieve statistical significance compared with chemotherapy.

In the German market, Zalando, Siemens Energy, RWE, BMW, Porsche, Volkswagen, Continental and Mercedes-Benz gained 2 to 3.1%.

Siemens ended modestly higher as it announced the intention to carve out its eMobility business.

Commerzbank fell more than 5.5% after the German government announced that it would hold on to its 12% stake in the lender.

The government “will not, until further notice, sell any additional shares,” the agency responsible for any sales said in a statement Friday. “This also includes sales related to any share buybacks.”

BASF and Merck ended down 1.9% and 1.25%, respectively.

In the French market, Stellantis, Schneider Electric, Air Liquide, Airbus Group, Renault and Publicis Groupe gained 1.2 to 2%.

Edenred dropped more than 5.5%. Credit Agricole, BNP Paribas, Societe Generale, Teleperformance and Bouygues lost 2 to 4.5%.

Kering, Thales, Veolia and Saint Gobain also ended notably lower.

On the economic front, the euro area private sector activity posted a renewed contraction in September, signaling a further weakening of the economy, a survey compiled by S&P Global showed.

The HCOB flash composite output index dropped to 48.9 in September from 51.0 in August. The reading was the lowest in eight months and remained below the forecast of 50.6.

The fall in overall business activity was driven by a deepening downturn in manufacturing activity, where production fell for the eighteenth month in a row. Although services business activity continued to grow, the pace of growth was the weakest since February.

The manufacturing Purchasing Managers’ Index slid to a nine-month low of 44.8 in September from 45.8 in the prior month. The score was expected to drop to 45.7. The services PMI posted 50.5 in September, which was down from 52.9 in August and well below forecast of 52.3.

German private sector activity fell deeper into contraction in September with accelerated reduction in manufacturing output, flash survey results from S&P Global showed on Monday.

At 47.2, the headline HCOB composite output index fell to a seven-month low in September from 48.4 in August. The score was forecast to fall moderately to 48.2.

The drag from the manufacturing sector increased as goods output posted its steepest rate of contraction for 12 months. At the same time, support to the economy from growth in the service sector continued to wane.

The services Purchasing Managers’ Index fell to a six-month low of 50.6 compared to 51.2 in the previous month. The reading was seen at 51.1.

The manufacturing PMI hit a 12-month low of 40.3, down from 42.4 in August. The reading was forecast to remain unchanged at 42.4.

France’s private sector economy slipped back into contraction in September as the temporary Olympic boost faded, flash survey data from S&P Global showed on Monday.

The HCOB composite output index posted 47.4 in September, down from a 27-month high of 53.1 in August.

The index fell below the critical 50.0 mark, indicating a renewed contraction in the private sector. Moreover, business activity fell at the fastest pace since January.

Manufacturing output declined the most since January, while fresh decrease was primarily driven by the more sizeable services sector, which slipped back into contraction after robust growth in August.

The manufacturing Purchasing Managers’ Index eased to 44.0 from 43.9 in the prior month. At 48.3, the services PMI dropped to a six-month low from 55.0 in August.

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