Europe close: Stocks stage small rebound after global sell-off

European stocks edged higher on Tuesday after dropping to a six-month low the previous session, though the rebound was relatively mild with investor confidence still dampened by the dramatic sell-off across global equity markets.

The Stoxx 600 index finished up just 0.3% at 488.44, having swung between gains and losses for most of the session. The pan-European benchmark had dropped more than 2% the previous session to settle at 487.05 – its lowest closing price since 14 February.

Global stock markets suffered steep losses on Monday, with the Dow Jones Industrial Average shedding more than 1,000 points or 2.6% and Japan's Nikkei 225 plummeting 12.4% – its worst intraday decline since 1987 – amid concerns about a recession in the US as well as the unwinding of yen carry trades.

However, while US and Asian stocks staged a partial rebound, with the Dow up 1.1% by the midday mark in New York and the Nikkei surging more than 10% by the close in Tokyo, European markets with more subdued, as rising indices in Frankfurt and London made up for weakness in Paris, Milan and Madrid.

"The tentative gains seen in Europe reflect the continued uncertainty evident within global markets, with Asian, US and European indices all still well below their July highs despite the push higher seen today," said Joshua Mahony, chief market analyst at Scope Markets.

Meanwhile, ooil prices were also attempting to rebound after their recent falls, with Brent crude up 0.6% at $76.78 a barrel by the close. Crude had dropped to $76.30 on Monday, its lowest settlement price since early January.

European data comes in mixed

Economic data was in focus in Europe after the first rise in German factory orders this year. According to figures from the Federal Statistical Office, orders were up 3.9% over the month, well ahead of the 0.8% increase expected by economists. This was the first monthly increase since December 2023.

The S&P Global/CIPS UK construction PMI also came in ahead of forecasts, rising from 52.2 to 55.3 in July, beating the 52.7 reading expected by the market. However, the eurozone HCOB construction PMI dipped to 41.4 from 41.8.

In other news, retail sales in the eurozone fell more than expected in June, declining 0.3% after a 0.1% gain the previous month; economists had pencilled in a drop of just 0.1%.

"Today's mixed data docket supports our view of a somewhat less positive growth momentum than previously assumed," said Paolo Grignani, senior economist at Oxford Economics. "Growing concerns about the state of the [eurozone] economy and the lack of a pick-up in the manufacturing sector have led us to revise down our eurozone GDP growth forecasts for 2025, amid growing signs that the ECB has overtightened."

Monte dei Paschi jumps

Monte dei Paschi was the high riser on the Stoxx 600, jumping nearly 9% after the Italian bank upgraded its payout ratio following a strong second quarter, and signalled it was close to selling its French arm MP Banque. The bank said it would give shareholders 75% of its pre-tax profit this year, up from an earlier payout ratio of 50%, after first-half gross operating profits jumped 18%.

Leading the fallers was German pharma group Bayer, which dropped 6% after reporting a 16.5% fall in quarterly adjusted profits due to weak demand.

UK-listed online real estate portal operator Rightmove fell 4% after parting ways with lettings platform OpenRent, with their partnership due to expire next month. The company assured investors that its FY24 trading performance would not be affected.

Also in London, Rolls-Royce surged 6% as JPMorgan Cazenove hiked its price target on the stock to 535p from 475p "after another set of strong results".