European shares fell for a fourth straight session yesterday due to losses in British blue chips and weak eurozone inflation data, while the technology sector outperformed on gains in major Apple suppliers.
Apple suppliers in the region rose after the iPhone maker was reported to have asked suppliers to make at least 75mn 5G phones for later this year, propping up the technology index.
STMicroelectronics, Dialog Semiconductor, Infineon Technologies and ASML were up between 1% and 4%.
The pan-European STOXX 600 index ended 0.4% lower after swinging in a range of 0.8% to negative 1%. The benchmark index has fallen behind its Wall Street peers this year, sticking to a tight trading range since June amid signs of a stalling eurozone economic recovery.
The European volatility index rose as much as 1 point to 27.8950 during the session. Inflation in the bloc turned negative last month for the first time since May 2016, putting further pressure on the European Central Bank to inject yet more stimulus to generate price growth, which has undershot its target for over seven years.
“The ECB has signalled that they would not like to lower interest rates any further.
So any changes in policy would likely be to step up purchases of government bonds even further,” said Teeuwe Mevissen, Senior Market Economist at Rabobank in Amsterdam.
A recovery in local manufacturing activity continued through August, a survey showed.
Travel and leisure stocks were the worst performing European sector for the day, as spiking Covid-19 cases in popular tourist destination Portugal spurred concerns about the country being quarantined.
British blue-chip stocks fell in catch-up trade after a holiday on Monday, touching a more than three-month closing low.
Financial stocks, particularly EU banks, marked a second straight day of losses.
Rabobank’s Mevissen said recent selling in financials was driven by expectations of an increased amount of bankruptcies in the second half of the year, due to the impact of the novel coronavirus.
On foreign exchange markets, the euro was mixed against major currencies on news that eurozone inflation slipped into negative territory in August for the first time since May 2016.
The EU’s Eurostat data agency said the rate stood at negative 0.2%.
That marked a steep slowdown from a positive 0.4% in July and was even further from the European Central Bank’s official target of close to but just under 2.0%.
The slowdown into deflationary territory comes despite historic stimulus measures by the ECB to push prices upwards and breathe life into the European economy. Meanwhile, a key barometer of economic activity, the PMI purchasing managers’ index, suggested that eurozone industrial growth began to run out of steam in August, economists at Oxford Economics noted.
The PMI index for Germany was revised sharply downwards and the index for France remained in contraction territory, Daniela Ordonez and Nicola Nobile said in an analyst comment.
Traders have now begun to focus on key US jobs data scheduled for publication on Friday.
The non-farm payrolls figures will provide a snapshot of activity that has struggled in recent weeks following the reimposition of virus containment measures to curb fresh outbreaks.
In London, the FTSE 100 closed down 1.7% to 5,862.05 points; Frankfurt — DAX 30 ended up 0.2% to 12,974.25 points; Paris — CAC 40 closed down 0.2% to 4,938.10 points and EURO STOXX 50 ended flat at 3,273.28 points yesterday.
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