PARIS (Reuters) – European markets ended lower on Thursday after disappointing economic data and figures and despite the Federal Reserve’s latest monetary policy meeting being deemed accommodative.
In Paris, the CAC 40 lost 2.14% to 7,366.13 points, while the German Dax fell by 2.28% and the British Footsie by 1.01%.
The EuroStoxx 50 index ended the session down 2.21%, compared to 1.31% for the FTSEurofirst 300 and 1.29% for the Stoxx 600.
The final PMI indicators for the industrial sector confirmed the slowdown in activity in July, while unemployment unexpectedly rebounded in June in the euro zone.
While the rebound remains moderate, markets are concerned about a weakening of the labor markets that would limit consumption this year, considered by the European Central Bank as the main driver of growth in 2024.
“If households have less confidence in the strength of the labour market, this could lead to more savings and a weakening of consumption,” summarise the economists at ING.
A series of poor results, particularly in the automotive and banking sectors, helped put pressure on the indices during the session.
Data from the US provided no relief: new jobless claims surprised sharply on the upside, while the ISM manufacturing activity indicator showed a significant weakening in hiring in the secondary sector.
These two elements support the caution of the chairman of the Federal Reserve, Jerome Powell, who stressed at the last monetary policy meeting on Wednesday that the risks to employment and inflation were now better balanced.
A slowdown in labor markets would force the central bank to ease monetary policy, but investors fear that the transmission to the real economy would take too long and trigger a recession.
British assets limited their losses thanks to the latest decision by the Bank of England, which cut its rates by 25 basis points on Thursday, initiating its monetary easing cycle.
The institution remained cautious but reported that activity will be stronger than expected this year, encouraging investors.
RATE
Yields are falling in the United States as investors digest the latest activity indicators, which suggest a sharper-than-expected weakening in labor markets a day after the Fed’s latest decision, mindful of this risk.
At the close of the European rate markets, the yield on the ten-year Treasury fell by 10.4 bp to 4.0008%, reaching its lowest level since February during the session, compared to 13.2 bp for the two-year rate, at 4.2058%.
The British 10-year bond fell 8.7bp to 3.884% after the BoE decision.
The yield on the German ten-year fell 5.3bp to 2.249%, while that of the two-year rate fell 6.6bp to 2.467%.
A WALL STREET
Wall Street fell mid-session after the publication of an activity indicator highlighting the weakness of industrial employment markets.
At the time of the European closing, trading on the New York Stock Exchange indicated a drop of 1.26% for the Dow Jones, against 0.91% for the Standard & Poor’s 500, and 0.96% for the Nasdaq Composite.
VALUES
The banking sector fell 4.48% after Societe Generale’s poor results (-8.65%), as the bank reported poor performance in its retail banking business in France on Thursday.
The rest of the sector fell with the French group: HSBC lost 6.88%, Sabadell 5.71%, Monte dei Paschi and UniCredit 6.01% and 5.28% respectively.
Crédit Agricole SA reported better-than-expected quarterly results on Thursday, but its earnings fell by 0.43%.
The automotive sector in Europe fell by 2.03% after disappointing results from BMW, which lost 3.08%, Volkswagen (-5.21%), and Daimler Truck (-2.99%).
Worldline lowered its full-year guidance on Thursday, saying domestic consumption trends in Europe were weak and a rapid recovery remained uncertain, sending shares down 14.7%.
Ayvens reported on Thursday an 11.5% increase in leasing and service margins in the first half and grew by 10.12%.
Aperam soared 4% as investors saw the start of a recovery in activity in the otherwise poor second-quarter figures released on Thursday.
Rolls-Royce said on Thursday it would resume dividend payments and raised its forecast for full-year operating profit and free cash flow, encouraged by a strong first half. Shares rose 7.27%, leading the Stoxx 600.
Hugo Boss confirmed on Thursday a 42% drop in its operating profit in the second quarter, and announced that it was focusing on cost reductions, which supported the share price and caused it to rise by 5.31%.
CHANGES
The pound is falling sharply against the dollar as investors price in a widening UK-US interest rate gap.
The dollar gained 0.27% against a basket of benchmark currencies, while the euro dropped 0.35% to $1.0787. The pound sterling lost 0.66% to $1.2771.
OIL
Oil is slightly down after the last meeting of OPEC+ ministers, who kept production quotas unchanged.
Brent fell by 0.69% to $80.28 per barrel, while American light crude (West Texas Intermediate, WTI) fell by 0.95% to $77.17.
(Written by Corentin Chappron, edited by Sophie Louet)
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