European Stocks Close Sharply Lower On U.S. Recession Fears

European stocks plunged sharply on Friday, sending several markets in the region to multi-month lows, amid concerns the weak U.S. data and the delay in interest rate cuts by the Fed could lead the world’s largest economy into a recession.

Disappointing earnings news from several big name U.S. companies, and weak economic data from Europe also weighed on the markets.

Tech stocks were under pressure after U.S. chipmaker Intel said it would cut more than 15% of its workforce in a desperate cost-cutting bid.

The pan European Stoxx 600 tumbled 2.73%. The U.K.’s FTSE 100 ended down 1.31%, Germany’s DAX dropped 2.33% and France’s CAC 40 fell 1.61%. Switzerland’s SMI plunged 3.59%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Netherlands, Norway, Sweden and Turkiye lost 2 to 4%.

Poland, Portugal, Russia and Spain ended down 1 to 2%, while Iceland ended modestly lower.

In the UK market, Intermediate Capital Group shares plunged more than 7%. Diploma, JD Sports Fashion, Melrose Industries and Barclays lost 6 to 7%.

3i Group, Mondi, Pershing Square Holdings, Ashtead Group, Burberry Group, Howden Joinery, Kingfisher, Marks & Spencer, Standard Chartered, Scottish Mortgage, Natwest Group, M&G, Rolls-Royce Holdings, HSBC Holdings, Anglo American Plc, Prudential and Fresnillo lost 3 to 6%.

British Airways owner IAG climbed nearly 5% after it posted strong first-half results and announced plans to pay a dividend for the first time since the start of the Covid-19.

Haleon, United Utilities, Severn Trent, GSK, National Grid, SSE, Unilever and Reckitt Benckiser gained 1 to 3%.

In the German market, RWE and Siemens Energy both ended down more than 7.5%. Zalando, Deutsche Bank, Infineon, Commerzbank, HeidelbergCement, Siemens, Sartorius, Daimler Truck Holding and Deutsche Post lost 4 to 6%.

Puma, Merck, Rheinmetall, Adidas, SAP, Symrise, Volkswagen, Mercedes-Benz, BASF, Siemens Healthineers, Munich RE, Fresenius, BMW and Allianz ended down 1 to 4%.

Qiagen, Vonovia, Brenntag, Deutsche Telekm and Bayer posted moderate gains.

In the French market, Credit Agricole plummeted more than 7%. Societe Generale ended down 6.25%. STMicroElectronics, Schneider Electric, Accor, Publicis Groupe, Renault and Teleperformance lost 4 to 5.6%.

Stellantis, Dassault Systemes, Legrand, Saint Gobain, BNP Paribas, ArcelorMittal, Unibail Rodamco, Hermes International, Viventi, Kering, LVMH and Edenred also declined sharply.

Engie gained 2.3%. The company lifted its profit guidance for 2024, citing a strong first-half performance in power generation and lower-than-expected financial costs.

Danone climbed about 2.7%. AXA and Sanofi also posted strong gains.

On the economic front, France’s industrial production recovered in June largely driven by the rebound in transport equipment output, data from the statistical office INSEE showed.

Industrial production registered a monthly growth of 0.8% in June, in contrast to the 2.2% decrease in May. However, this was weaker than the expected growth of 1%.

Manufacturing output also grew by 0.8%, reversing May’s 2.7% decline.

Switzerland’s consumer price inflation held steady as expected in July, the Federal Statistical Office reported today. The consumer price index rose 1.3% on a yearly basis, the same as in June. In May, the inflation rate was 1.4%.

In U.S. economic news, the Labor Department’s report said non-farm payroll employment climbed by 114,000 jobs in July after jumping by a downwardly revised 179,000 jobs in June. Economists had expected employment to rise by 175,000 jobs compared to the surge of 206,000 jobs originally reported for the previous month.

The Labor Department also said the unemployment rate rose to 4.3% in July from 4.1% in June. Economists had expected the unemployment rate to remain unchanged.

With the unexpected increase, the unemployment rate reached its highest level since hitting 4.5% in October 2021.