European Stock Markets Extend Losses On Monday as Global Sell-off Intensifies

Bridgette Randall
05 Aug, 2024
London

European markets extended losses from last week as investors adjusted their global growth outlook amid a weakening economic backdrop. 

Benchmark indexes in Paris, Frankfurt, and London dropped between 2% and 4% as weaker-than-expected earnings from mega-cap tech companies were compounded by the weakening economic drop in the U.S. 

Large European companies relied on export growth to the U.S. and China, which is the main driver of earnings growth, because of the stagnant economic conditions in the European Union. 

However, in recent quarters, most of the earnings growth has been driven by U.S. demand growth, offset by China's weaker-than-expected economic recovery. 

Now if the U.S. economy weakens, that could severely impact demand for European industrial and luxury goods, providing another headwind for earnings at European companies. 

In domestic economic news, a survey showed the eurozone economy stalled in July as demand for goods and services deteriorated. 

The HCOB composite PMI output index fell to a five-month low of 50.2 from 50.9 in June, S&P Global reported Monday. 

In the week ahead, investors are awaiting the release of German factory orders and industrial production data, both of which are expected to show a rebound, and final inflation data is expected to confirm acceleration in July.

In the eurozone, investors are looking forward to the release of retail sales and producer price indexes, industrial production in Spain, the unemployment rate in France, and an inflation update in Italy. 

 

Europe Indexes and Yields

The DAX index decreased by 2.5% to 17,209.20; the CAC-40 index fell by 2.4% to 7,105.90; and the FTSE 100 index declined by 2.6% to 7,961.64.

European bond yields dropped to six-month lows as investors sought safety in government securities amid growing worries about the global economic slowdown and rising geopolitical tensions. 

The yield on 10-year German bonds edged lower to 2.10%, French bonds inched lower to 2.92%, the UK gilts inched lower to 3.77%, and Italian bonds decreased to 3.62%.

The euro edged down to $1.09; the British pound inched lower to $1.272; and the U.S. dollar weakened to 85.05 Swiss cents.

Brent crude decreased $1.35 to $75.44 a barrel, and the Dutch TTF natural gas fell by €1.80 to €34.85 per MWh.

 

Europe Stock Movers

Clarkson PLC plunged 10.4% to 3,875.0 pence after the UK-based shipping broker reported a decline in sales and earnings in the first half. 

OCI NV increased 10.3% to €23.82 after Woodside Energy agreed to acquire the Netherlands-based chemical maker's clean ammonia plant in Texas for 2.35 billion. 

Woodside Energy decreased 2.5% to 1,302.0 pence. 

Senior plc plunged 7.7% to 145.4 pence, despite the UK-based engineering company reporting a 10% increase in its first-half profit. 

Aurubis AG rose 9.2% to €62.50 after the non-ferrous metal producer and copper recycler reported third-quarter operating earnings below market expectations. 

Galderma AG increased 4.6% to CHF 70.09 after L'Oreal said it acquired a 10% stake in the dermatology company for an undisclosed amount.