European Shares Decline Driven by Tech Stocks as Investors Assess PMI Data

By Pranav Kashyap

European shares experienced a downturn on Thursday, primarily influenced by the decline of German technology company SAP, as investors analyzed crucial inflation data from the region and its major economies. The pan-European index fell by 0.8%, closing at 516.80 points.

The automobile sector led the declines, sinking 2.1% to its lowest level in nearly a year. This drop was largely attributed to a 4.7% fall in Stellantis after Barclays downgraded the stock from "overweight" to "equal weight."

SAP’s stock decreased by 1.5%, contributing to a nearly 1% decline in the substantial technology sector. This drop followed reports indicating that U.S. prosecutors are expanding their investigation into potential price-fixing activities by the German software giant.

All other sub-sectors of the STOXX 600 also recorded losses. Among regional exchanges, one index fell by 1.1%, the most significant drop among its peers, while another declined by 0.9%. A third index, which had opened 0.3% higher following remarks from the Bank of England Governor about possible interest rate cuts, settled back to flat.

Ben Laidler, head of equity strategy at Bradesco BBI, noted that "a stalling of the Chinese rally, higher oil prices, increasing bond yields, and a stronger dollar are applying pressure to the bullish narrative." He added, "There’s some natural profit-taking occurring. Traders are looking for guidance from China’s reopening and the U.S. payroll report set to be released on Friday."

In the meantime, PMI data revealed that business activity in the Eurozone contracted in September, falling to 49.6 from 51 in August. The service sector’s PMI figures for key European economies indicated a near stagnation in Italy’s services, a contraction in France’s services, and ongoing slowing growth in Germany’s services sector for four consecutive months.

This economic data has heightened expectations for an interest rate cut during the European Central Bank’s upcoming meeting on October 17. Additionally, ECB board member Isabel Schnabel indicated that inflation in the Eurozone is increasingly likely to retreat to the central bank’s 2% target, lessening her previous emphasis on the challenge of controlling price growth.

The Eurozone’s producer prices data is expected to be released at 0900 GMT.

Notably, K+S, a potash and salt miner, saw a significant decline, dropping 6.8% to the bottom of the STOXX 600 after J.P. Morgan downgraded its stock rating from "overweight" to "neutral."