© Reuters German share price index DAX graph 2 Frank September, 2021, illustrated on the Stock Exchange in Frankfurt, Germany. Router / Staff
Written by Shruti Shankar and Shreyashi Sanyal
(Reuters) – European stocks fell to a two-month low on Friday as data on company and factory activity provided alerts – highlighting economic progress from chain constraints and higher prices.
The index fell 0.4% across Europe in a weak start to October, a tradition that has traditionally been a difficult month for equities, with technology, mining and banks leading to massive declines. The STOXX 600 week ended with a 2.2% decline.
World Electrical retailer Ao World plc also fell 24.3%, citing a shortage of delivery drivers in the UK and other disruptions in the global supply chain affecting revenue growth in the first half of the year.
Meanwhile, a study found that eurozone manufacturing growth was strong in September but activity suffered a major blow from supply chain disruptions that could likely continue and keep inflationary pressures high.
“It looks like the ECB will maintain its policy in the future, but that doesn’t mean that high inflation should be ignored,” said David Madden, a market analyst at Equity Capital.
Weak figures from Asian factories and overnight losses on Wall Street have dampened global mood as investors await a report that eurozone inflation is expected to reach a 13-year high. [GVD/EUR]
With government bond yields at a multi-month high and inflation concerns mounting, the benchmark STOXX 600 closed 3.4% lower in September, the worst monthly performance in almost a year.
“For equities, this combination of slower growth – albeit higher demand – means rising inflation and higher bond yields mean somewhat higher volatility, lower market returns and a downward spiral,” says Goldman Sachs (NYSE 🙂 strategist Sharon Bell in a note.
“It didn’t help that revenue revisions began to slow from their frantic pace at the beginning of the year.”
BofA Global Research has downgraded its outlook for European stocks, predicting a decline of about 10% towards the end of the year due to changes in the macro backdrop towards “anti-goldilocks”, with slower growth and higher discount rates.
BMW AG rose 1.3% after lifting its annual profit margin forecast as the high cost of new and used vehicles outweighed the impact of supply-chain problems.
French state-owned utility EDF (PA 🙂 and energy group Angie rose 5.9% and 2.5%, respectively, with traders pointing to relief that electricity tariffs were untouched by the government’s plans to control further price increases.
Orange, France’s largest telecom group, fell 0.8% as it said it would buy a 21.7% stake in Orange Bank, the online banking unit of insurer Groupma.
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