by Diana Mandia

(Reuters) – European stocks ended a session dominated by global growth fears lower on Tuesday as China and the euro zone released data showing a slowdown or even contraction in services activity.

In Paris, the CAC 40 ended down 0.34% at 7,254.72 points. The British Footsie lost 0.2% and the German Dax 0.34%.

The EuroStoxx 50 index also ended down 0.25%, the FTSEurofirst 300 dropped 0.19% and the Stoxx 600 0.2%.

A series of surveys released on Tuesday showed services activity suffered further last month, hit by weak demand as inflation and rising rates prompted consumers to cut back on spending.

In China, the world’s second largest economy, activity in the services sector grew in August at its weakest pace in eight months, despite stimulus measures that were not enough to revive consumption.

In the euro zone, the composite PMI index published on Tuesday shows that the slowdown in economic activity worsened more than expected in August to a nine-month low, due to the decline in services. In France, the sector continued to decline, while in Britain and Germany it recorded its first contraction of 2023 last month.

“The final PMIs released today have been revised down from the already low levels reported in the preliminary reading two weeks ago. We continue to expect a second-half recession,” said Adrian Prettejohn of Capital Economics.

These data are known as a major meeting is looming on September 14 in Frankfurt: the ECB must decide whether or not to interrupt the rise in interest rates to curb inflation.

Euro zone consumer expectations for three-year inflation rose to 2.4% in July from 2.3% in June, a survey by the monetary institution showed on Tuesday. Its chief economist Philip Lane said more data was needed before claiming victory on the price front.

VALUES

Penalized by JP Morgan’s comments on the risks of falling prices, the food retail sector (-0.47%) suffered on Tuesday, with Ahold Delhaize which dropped 6.07% and Carrefour 2.18%

The European energy compartment advanced 1.18% thanks to the jump in oil prices.

In Paris, Crédit Agricole lost 2.01%, after Goldman Sachs lowered its recommendation from “neutral” to “sell”, while Sanofi benefited from the increase in its recommendation by Berenberg and gained 1.02%

The luxury groups LVMH and Kering, very exposed to China, ended down 1.74% and 2.19%.

AT WALL STREET

At the time of closing in Europe, the Dow Jones had started to rise again and took 0.09%, as did the Standard & Poor’s 500, which gained 0.04%. The Nasdaq Composite, however, dropped 0.31%.

The energy sector gains on higher oil prices, with Chevron up 1.546%, while major airline stocks are penalized, with American Airlines and Delta Air Lines both down around 2.5%.

CHANGES

The dollar is up 0.44% against a basket of benchmark currencies, as concerns about the economy invite investors to turn to the greenback, considered a safe haven.

The euro, however, hit a three-month low and dropped 0.63% to 1.0726 dollars.

RATE

Yields in Europe rose on Tuesday as they await the European Central Bank’s (ECB) rate decision next week, and as a survey by the institution showed consumer expectations for inflation rose .

The German 10-year yield rose nearly 3 bps to 2.6%, while the two-year yield rose 1.4 bps to 3.036%.

US bond markets are also up: the ten-year Treasury yield takes over 8 basis points to 4.2538%, while the two-year rate US2YT=RR gains over 7 basis points to 4.9409 %.

OIL

Oil rose on Tuesday after Saudi Arabia and Russia announced a further extension of their supply cuts.

Brent rose 2.19% to 90.95 dollars per barrel LCOc1, while American light crude (West Texas Intermediate, WTI) rose 2.65% to 87.82 dollars CLc1.

TO BE FOLLOWED ON WEDNESDAY:

The Bank of Canada is due to announce its rate decision and the Fed will publish its Beige Book, which serves as the basis for the work of the US central bank’s monetary policy committee (FOMC).

(Written by Diana Mandia)

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