European Shares Decline on Growth Concerns; French Stocks Hit Harder, Reports Reuters

By Shubham Batra and Lisa Pauline Mattackal

European stocks experienced a decline on Thursday as mixed economic indicators raised concerns about global growth, overshadowing advances in interest rate-sensitive sectors, resulting in 40 leading national declines.

The pan-European index decreased by 0.5%, with sectors such as healthcare, chemicals, and personal goods seeing declines of over 1%.

Economic apprehensions continued to dampen market sentiment. While German industrial orders increased more than anticipated in July, euro zone retail sales fell on an annual basis. This, coupled with signs of a weakening labor market in the U.S., kept investors on edge ahead of the critical U.S. nonfarm payrolls data scheduled for release on Friday.

"The industrial orders were good news for Germany, but everyone’s focus is currently on U.S. job data… tension in the market is escalating as we approach tomorrow’s U.S. job report, which explains the ongoing sell-off in both the U.S. and European stock markets," stated Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

France’s benchmark index dropped by 0.9%, marking its third consecutive loss, influenced by concerns over a slowdown in major consumer China, which negatively impacted luxury stocks. An index tracking luxury stocks declined by over 3%, with shares of LVMH and Hermes International falling by 3.6% and 6.4%, respectively.

The appointment of Michel Barnier, the EU’s former Brexit negotiator, as France’s prime minister brought a slight lift to some bank stocks and government bonds, as it raised hopes for alleviating the political turmoil that followed President Emmanuel Macron’s call for a snap election in June. However, Ozkardeskaya noted, "Having a Prime Minister is a positive development that can calm market nerves, but this period of political uncertainty has already dampened investor appetite for France."

Germany’s benchmark index remained flat, with the Ifo Institute indicating the economy is likely to stagnate this year, a notable shift from earlier growth forecasts of 0.4%.

In contrast, the rate-sensitive utility and real estate sectors emerged as the leading gainers, each rising by over 1%, as investors anticipated interest rate cuts from both the European Central Bank and the Federal Reserve later in the month.

Economists surveyed expect the ECB to reduce its deposit rate by 25 basis points on September 12, with another cut anticipated in December.

On an individual stock basis, Airbus SE saw a decline of 1.4% after Europe’s air safety regulator announced it would require inspections on part of its A350 fleet, following an engine part failure during a Cathay Pacific flight.

In some positive news, Vistry surged by 8.5% after the British homebuilder announced a share buyback worth £130 million, following a 7% increase in half-year earnings.

Meanwhile, technology shares broadly fell, extending their losses from the previous session, with ASML Holdings dropping by 2.2%, reflecting weakness in U.S. semiconductor stocks.