Europe close: Widespread stock decline as OECD forecast drags markets lower

European stocks began the week on a downbeat after a report warned of a drastic slowdown in global trade growth this year.

The benchmark Stoxx Europe 600 index closed down 1.07%, while Germany’s DAX fell 1.57% and France’s CAC 40 lost 1.46%.

As of 1636 GMT, the euro was broadly flat against the pound and gained 0.38% against the dollar and 0.30% against the yen, while Brent crude declined 0.55% to $47.16 a barrel.

OECD lower global trade forecast

Due to a “deeply concerning” slowdown in trade, global GDP will grow by 2.9% this year, a report by the Organisation for Economic Co-operation and Development (OECD) said.

The figure is lower than the original 3% forecast released in September, while OECD lowered worldwide trade growth from 3.4% to 2%.

“Global trade is only expected to grow by 2% this year, which has only happened five times in the past 50 years,” said IG’s market analyst Joshua Mahony. “These periods all coincided with financial market downturns.

“No doubt the Chinese slowdown is disproportionately responsible for reduced global trade data, yet it highlights the impact that this one country has in world economics.”

On the economic data front, Germany’s trade surplus, adjusted for seasonal swings and calendar effects, narrowed to €19.4bn from €19.7bn, compared with analysts’ expectations for a €20bn reading.

The narrowing was driven by a surge in imports, which grew 3.6% month-on-month in September compared with a downwardly revised 3.2% decline in the previous month and with consensus forecast for a 1% gain.

Exports rose 2.6% month-on-month, recovering from a 5.2% decline in August, the sharpest decline in almost seven years, and beating expectations for a 2% gain.

“While German trade data was better than expected, calls for more Eurozone stimulus from the European Central Bank will be weighed,” said Michael Van Dulken of Accendo Markets.

Elsewhere, the forward-looking Sentix investor confidence index for November rose from 11.7 to 15.1, comfortably above analysts’ expectations for a 13.1 reading, as it registered a first increase after two consecutive monthly declines.

VW again under the cosh

In company news, Volkswagen slipped 1.56% after engineers admitted they had manipulated carbon dioxide emissions data because goals set by former chief executive Martin Winterkorn were too difficult to achieve.

Renault dropped 3.51% as French Prime Minister Manuel Valls said over the weekend that the government did not want a merger between the car maker and its Japanese partner Nissan.

Continental tumbled 5.59%, as investors booked profits after the tyre company nudged up its full year outlook following higher third quarter earnings.