Europe close: Falling auto, oil stocks pull markets lower

European equity markets fell on Tuesday, as early gains were followed by an afternoon sell-off, with heavy falls from auto and oil stocks providing a big drag across the continent.

Carmakers were out of favour after a disappointing update from sector giant BMW, while a 4% plunge in the price of oil to a three-year low weighed on energy names.

Following a brief stint in positive territory, the Stoxx 600 finished the session down 0.5% at 507.95, marking the benchmark's sixth session in the red over the past seven trading days.

Investors were choosing to adopt a cautious approach ahead of Thursday's European Central Bank policy meeting, after which a 25 basis-point cut in the deposit rate to 3.5% is widely expected.

In economic data on Tuesday, German inflation was confirmed at 1.9% in August, its lowest level in three and a half years, according to final estimates from Destatis. The year-on-year change in consumer prices eased from 2.3% in July and matched the preliminary estimate released two weeks ago. This was the first time the consumer price index has dipped below the key 2% mark since March 2021 as energy prices dropped 5.1%, compared with a 1.7% decline in July.

Meanwhile, the Office for National Statistics reported that the UK unemployment rate declined to 4.1% in the three months to July, from 4.2% previously, marking a six-month low and in line with economists’ expectations. Meanwhile, growth in average earnings fell to 5.1%, hitting a two-year low but still well above the Bank of England's 2% inflation target.

Auto and oil stocks out of favour

Shares in BMW tanked to their lowest in nearly four years after the German automaker scaled back its full-year guidance on the back of weak market conditions in China and costs related to a product recall. Group earnings before tax are expected to "decrease significantly" this year, compared with previous guidance of a "slight decrease", with margins in both the automotive and motorcycle divisions reduced.

German sector peers Continental and Mercedes-Benz were also falling sharply, along with France-listed rivals Renault and Stellantis.

Brent crude was nearly 4% lower at around $69 a barrel – its lowest since November 2021 – after OPEC cut its forecast for oil demand this year for the second straight month, citing weaker-than-expected demand from China. BP, Shell, Harbour Energy and TotalEnergies were all in the red.

Shares London-listed gold miner Centamin surged nearly 25% after announcing an agreement to be taken over by AngloGold Ashanti in a £1.9bn deal. Others in the sector, such as Fresnillo, Hochschild Mining and Endeavour Mining were also putting in gains.

Heading the other way was AstraZeneca as investors reacted to disappointing news from the UK company's latest lung cancer trials.

Meanwhile, Europe's listed hearing care companies Amplifon, Sonova, Demart and GN Store Nord were also heavy fallers after Apple announced that its new AirPods Pro 2 headphones could with clinical-grade hearing aid tech.