Energy stocks drag European stocks lower, reversing earlier gains


European stocks slipped slightly on Monday, dragged lower by energy stocks on fears of a global economic slowdown, fueled by disappointing Chinese economic data and figures showing a slowdown in euro-zone manufacturing activity.

The pan-European STOXX 600 slipped 0.1 percent after a choppy day of trading, reversing modest earlier gains.

Factories in the United States, Europe and Asia struggled for momentum in July as slowing global demand and China’s Covid-19 restrictions slowed production, surveys showed, fueling fears of a recession.

Energy stocks slipped 1.5 percent, gaining six straight days as crude prices fell sharply after weak factory data renewed demand concerns.

Meanwhile, euro-zone unemployment held steady at 6.6 percent of the labor force in June, the European Union’s statistics office said, in line with market expectations.

“The labor market will remain tight even as the economy enters a recession, keeping upward pressure on wage growth and inflation,” said Jack Allen-Reynolds, senior Europe economist at Capital Economics.

“We expect that (wage growth) to continue to pick up as workers facing record inflation push for bigger wage increases. That will increase the cost pressures companies face, which in turn should keep consumer price inflation strong next year.”

European stocks posted their best monthly performance since November 2020 on Friday, helped by strong corporate earnings from Europe, although overall sentiment remained fragile.

“The painted picture is increasingly grim for the EU, and drilling down the numbers shows lower sales, falling rates of new orders and exports, and sharp rises in inventories,” said Stuart Cole, senior macroeconomist at Equiti Capital.

“It must be expected that manufacturers will continue to reduce production in the future.”

In Germany, the engine of Europe’s economy, data showed that retailers ended the first half of 2022 with the sharpest year-on-year drop in sales in almost three decades as inflation, the Ukraine conflict and the pandemic took their toll.

Heineken NV slipped 0.4 percent as the world’s second-biggest brewer shelved its 2023 margin target as costs soared.

Pearson rose 12.7 percent to the top of the benchmark index after the British education group reiterated its full-year profit outlook.

Bank stocks provided further impetus after London-listed HSBC rose 6.1 percent on an earnings hit and prospects for stronger dividends.

Europe’s biggest bank has also rejected a proposal by main shareholder Ping An Insurance Group Co of China to split up the lender, arguing the move would be costly. Energy stocks drag European stocks lower, reversing earlier gains

Fry Electronics Team

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