LONDON – European equities were lower on Thursday as global markets see renewed volatility following a brief recovery from last week’s tumultuous trading.
The pan-European Stoxx 600 fell 0.5% late in the morning, recovering more than half of its previous losses. Banks fell 1.5% while travel and leisure shares rose 1.1%.
In terms of individual stock price movements, 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 the target price.
At the top of the index, the French IT company Atos jumped more than 10% after a French media report that the government would support a possible merger with the compatriot’s airline Thales.
European equities closed lower on Wednesday, reversing gains in previous sessions as global volatility continued and market sentiment shifted to a more negative setting amid fears of rising inflation and declining economic growth.
US stock futures fell early on Thursday after major indices fell red at the end of regular trading and investors weighed the likelihood of a recession following comments from Federal Reserve Chairman Jerome Powell.
Powell told Congress on Wednesday that the central bank is “strongly committed” to bringing down inflation after the exchange rate reached a 40-year high in the United States. He also noted that a recession is an “opportunity” – a fear that has continued to weigh on Wall Street.
Meanwhile in the Asia-Pacific markets overnight, sentiment was more mixed as investors continued to monitor recession concerns.
On the data front in Europe, flash estimates for French and German PMI readings (Purchasing Managers’ Index) for June were weaker than expected, which contributed to recession fears.
The German composite PMI, which captures manufacturing and service activity, fell to 52.0 from corn 54.8, below a forecast of 54.0 by analysts in a Reuters poll. France’s compound reading came in at 52.8, down from 57.0 in May.
The PMI for the wider eurozone also fell sharply to 51.9 in June from 54.8 in May, with economists predicting a reading of 53.9.
Thomas Rinn, global industry leader at Accenture, said the weak measurements demonstrated the “uphill battle” facing the eurozone manufacturing sector.
“Facing challenges such as rising material and energy costs, industrial companies in Europe continue to struggle with limited revenues and operational challenges,” said Rinn.
“Although there are signs of an improvement in order numbers, inflationary pressures look as they have come to stay, and European producers should prepare accordingly.”
Elsewhere, the Central Bank of Norway announced a surprising increase of 50 basis points to its reference rate on Thursday, the country’s largest single increase since 2002.
The movement raises the key interest rate from 0.75% to 1.25%, and Norges Bank CEO Ida Wolden Bache said in a statement that it will probably be raised to 1.5% in August.