LONDON — European stocks were lower Thursday, as global markets see renewed volatility after a brief recovery following last week’s tumultuous trading.
The pan-European Stoxx 600 dropped 0.5% by late morning, having recouped more than half of its earlier losses. Banks fell 1.5% while travel and leisure stocks gained 1.1%.
In terms of individual share price movement, Aroundtown fell more than 7% to the bottom of the European blue chip index after JPMorgan downgraded the real estate company’s stock to “underweight” and cut its target price.
At the top of the index, French IT company Atos jumped more than 10% after a French media report that the government would support a possible merger with compatriot aerospace firm Thales.
European stocks closed lower on Wednesday, reversing gains made in the previous sessions as global volatility continued and market sentiment shifted to a more negative setting amid fears over surging inflation and slowing economic growth.
“Faced with challenges such as increasing material and energy costs, industrial companies in Europe continue to struggle with restricted revenues and operational challenges.”
Thomas Rinn
Global Industrial Lead, Accenture
U.S. stock futures dipped early on Thursday after the major indexes slipped into the red at the end of regular trading and investors weighed the likelihood of a recession after comments from Federal Reserve chair Jerome Powell.
Powell told Congress on Wednesday that the central bank is “strongly committed” to bringing down inflation after the rate hit a 40-year high in the United States. He also noted that a recession is a “possibility” — a fear that has continued to weigh on Wall Street.
Meanwhile in Asia-Pacific markets overnight, sentiment was more mixed as investors continued to monitor recession concerns.
On the data front in Europe, flash estimates of French and German PMI (purchasing managers index) readings for June came in weaker than expected, adding to recession fears.
The German composite PMI, which captures manufacturing and services activity, dropped to 52.0 from May’s 54.8, below a forecast of 54.0 by analysts in a Reuters poll. France’s composite reading came in at 52.8, down from 57.0 in May.
The broader euro zone PMI also dropped markedly to 51.9 in June from 54.8 in May, with economists having forecast a reading of 53.9.
Thomas Rinn, global industrial lead at Accenture, said the weak readings demonstrated the “uphill battle” facing the euro zone manufacturing sector.
“Faced with challenges such as increasing material and energy costs, industrial companies in Europe continue to struggle with restricted revenues and operational challenges,” Rinn said.
“Though there are signs of a recovery in order numbers, inflationary pressures look like they are here to stay, and European manufacturers should prepare accordingly.”
Elsewhere, Norway’s central bank announced a surprise 50-basis-point hike to its benchmark interest rate on Thursday, the country’s largest single increase since 2002.
The move takes the policy rate from 0.75% to 1.25%, and Norges Bank Governor Ida Wolden Bache said in a statement that it will likely be raised to 1.5% in August.