Friday, August 12, 2022

European stocks fall on weaker economic data

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European stocks fell on Friday, erasing the week’s gains, with the latest economic data showing damage from extended lockdowns to control winter coronavirus outbreaks.

The regional Stoxx 600 index fell 1 percent in morning trading, while the UK benchmark FTSE 100 fell 0.6 percent. Germany Xetra Dax lost 0.9% and France CAC 40 fell 1.1%.

The latest IHS Markit purchasing managers’ indices – eagerly awaited by investors keen to gauge the impact of the latest social restrictions – showed a sharp decline in activity in January.

For the euro area as a whole, the composite survey, which includes manufacturing and services, gave a reading of 47.5, well below expectations and down from 49.1 in December. A reading above 50 indicates activity is increasing.

France did less well than expected, with a composite number of 47, below the 49 expected by economists polled by Reuters. Germany managed to beat expectations with a reading of 50.8, but it was still down from 52 from the previous month. And the UK did the worst of all, recording 40.6 for the composite figure, even below the 45.5 expected by economists.

“Growth, which was widely expected in 2021, was essentially pushed back later in the year,” said Dean Cheeseman, portfolio manager at Janus Henderson. He added, however, that market reaction would likely be muted, as some easing was “already widely anticipated”.

Writing ahead of the release of the numbers, Deutsche Bank strategist Jim Reid said the data would provide “an early indication of how the world economy will perform in 2021.”

The resurgence of the virus in Europe, along with new restrictions, indicates “further declines from December figures, although manufacturing is doing better than services as has been the case throughout the pandemic,” said he added. This has been confirmed by the numbers.

Goldman Sachs analysts, forecasting the numbers earlier this week, said they would help “assess the extra cost of the January lockdown”, as well as provide the latest snapshot of Europe’s industrial economy and hopes companies for a rebound linked to vaccines. The Eurozone manufacturing PMI stood at 54.7, slightly ahead of economists’ expectations.

The British pound fell 0.6% against the dollar after the publication of the PMIs, reversing the course after a strong advance in recent days driven by vaccine optimism: a Covid-19 vaccine has been administered to more than 4 , 9 million people in the country. The pound remains 0.5 higher for the week.

Jane Foley, head of foreign exchange strategy at Rabobank, said that while the Brexit trade deal reached on Christmas Eve may have brought some relief to the pound in recent weeks, the stronger sense of this week was also the result of ‘optimism about the British recovery drawn from the relatively rapid pace of vaccine deployment and related hopes that the [Bank of England] could avoid a negative bank rate ”.

On Wall Street, futures followed by the blue-chip S&P 500 slipped about 0.7%, while those on the tech-focused Nasdaq 100 indicated it would open 0.6% less after the ‘establishment. records in the last days.

In Asia, Hong Kong’s Hang Seng index fell 1.6%, Japan’s Topix benchmark index fell 0.2% and South Korea’s Kospi 200 fell 0.7%.


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