European shares slip after recent rally, economic worries weigh
FRANKFURT: European shares paused on Thursday afters recent strong gains, while data in Germany added to worries that the industrial sector will continue to drag on euro zone’s largest economy.
The pan-European STOXX 600 slipped 0.3% after touching a more than four-month high on Wednesday, while Germany’s DAX dipped 0.2% after scaling a fresh all-time high in the prior session.
“It seems like a runaway trade, and we may see a little correction given the overextended rally,” said Daniela Hathorn, senior market analyst at Capital.com.
“By no means is this a turning point as there’s still further momentum to go.”
Fresh data showed Germany’s industrial sector struggling as Germany’s industrial production unexpectedly fell in October, a day after industrial orders in the 20-bloc nation’s largest economy also surprisingly fell during the same month.
Further, data showed Italian industrial output fell 0.2% in October month-on-month, a fraction less than expected.
“At the back of everyone’s mind on the macro side, fundamentally, there are some concerns,” Hathorn added.
European statistics agency Eurostat confirmed its estimate that gross domestic product (GDP) in the euro zone decreased 0.1% in the third quarter compared to the previous three months.
A Reuters poll showed the ECB will start cutting rates by the second quarter of next year, earlier than previously thought, as the economy enters a short and shallow winter recession.
Shares of Spanish and Portuguese banks like Millennium BCP , Sabadell, Caixabank, Santander and Bankinter fell between 2.3% and 5.9%.
“I do not rule out that the market is pricing that the favourable situation (for the banking sector) will be over soon, as central banks will not raise rates anymore and they will stipulate possible cuts in 2024,” said IG analyst Diego Morin.
Overall, banks shed 0.7%.
BASF plans to turn its agriculture, battery materials and coatings businesses into autonomous units to try to boost earnings, a major revamp for the German chemicals giant that has traditionally been highly integrated. Its shares rose 1.5%.
Shares of Games Workshop Group tumbled 13.7% to the bottom of STOXX 600 after the miniature wargame maker reported a half-year trading update.
Thyssenkrupp fell 5.4% as the company may need to hand over cash or keep hold of some pension liabilities to win over Czech billionaire Daniel Kretinsky as a co-owner of its steel business.
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