European Stocks Close Weak On Geopolitical Tensions, Weak Euro Area Economic Data

European stocks closed lower on Thursday as rising tensions in the Middle East and uncertainty about China’s growth outlook despite the recent stimulus measures weighed on investor sentiment. Weak Euro area private sector data hurt as well.

Data compiled by S&P Global showed the euro area private sector shrank for the first time in seven months in September as Germany, France and Italy recorded contractions simultaneously for the first time in 2024 so far. The final HCOB composite output index fell to 49.6 in September from a three-month high of 51.0 in August. The flash score was 48.9.

The pan European Stoxx 600 dropped 0.93%. The U.K.’s FTSE 100 edged down 0.1%, Germany’s DAX ended down 0.78% and France’s CAC 40 tumbled 1.32%, while Switzerland’s SMI fell 0.91%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Poland, Portugal, Sweden and Turkiye ended with sharp to moderate losses.

Norway edged down marginally. Russia closed higher, while Spain fnished slightly up.

In the UK market, Phoenix Group Holdings dropped 5.7%. Diploma ended 5.1% down. M&G, Hargreaves Lansdown, Prudential, Antofagasta, GSK, Anglo American Plc, Spirax Group, Coca-Cola, National Grid, Natwest Group and Weir Group lost 1 to 2.5%.

Rolls-Royce Holdings rallied 2.81%. Tesco gained about 2.5% after the supermarket group lifted its annual profit forecast after profit and revenue increased in the first six months of the financial year.

Shell, Scottish Mortgage, JD Sports Fashion, Persimmon, Barratt Developments, HSBC Holdings, Taylor Wimpey, Sainsbury and Vistry Group advanced 1 to 1.8%.

In the German market, Continental ended more than 3% down. Infineon and Porsche closed lower by about 2.8% and 2.5%, respectively. Beiersdorf, Bayer, Volkswagen, Qiagen, Vonovia, BMW, Fresenius Medical Care, Sartorius, Hannover Rueck and Mercedes-Benz lost 1 to 1.7%.

SAP ended notably lower after a U.S. price-fixing probe into the company. Daimler Truck Holding, Rheinmetall, Commerzbank, Siemens Energy and BASF closed with solid gains.

In the French market, Stellantis declined 4.2% declined as output dropped at all six of its factories in Italy in the first nine months. Bouygues ended 4.8% down, while Orange closed down 4%.

Vinci, Publicis Groupe, Saint-Gobain, Kering, Air Liquide, STMicroElectronics, Renault and Capgemini lost 2 to 3%.

TotalEnergies gained about 1.5%. Teleperformance climbed nearly 1%, while Accor closed with a modest gain.

In an interview with The Guardian newspaper, the Bank of England (BoE) Governor Andrew Bailey said the central bank could move a “bit more aggressively” on interest rate cuts.

The BoE had reduced its benchmark rate by a quarter-point in August, which was the first reduction since March 2020. In a tight 5-4 vote, the bank had cut the rate to 5.00 from a 16-year high level.

UK inflation has retreated from its highs and is currently at 2.2%, slightly above the 2% target. More favorable development on the inflation front could make the bank become “a bit more activist” in its rate-cutting stance, Bailey said.

Eurozone producer prices continued to decline in August due to falling energy prices, data from Eurostat showed. Producer prices registered an annual fall of 2.3% after a 2.2% decrease in July. Prices were forecast to drop 2.4%. Excluding energy, producer price inflation held steady at 0.3% in August.

The UK service sector activity continued to expand in September amid rising domestic demand, though the pace of growth eased since August. The S&P Global Services Purchasing Managers’ Index dropped to 52.4 in September from 53.7 in the previous month. New orders grew close to the 14-month peak seen in July, underpinned by lower borrowing costs and domestic economic stability.

Switzerland’s consumer price inflation eased unexpectedly in September to the lowest level in more than three years. The consumer price index rose 0.8 percent on a yearly basis in September, slower than the 1.1% rise in August. Meanwhile, economists had expected the inflation to remain stable at 1.1%.