Europe midday: Recession fears hammer sentiment; EZ services grow again

European shares were down sharply on Wednesday as worries about growth in the US and China dampened sentiment after weak data prints overnight.

The pan-regional Stoxx 600 index was down 1% at 514 with all major bourses lower. US and Asian equities fell overnight, sparked by the latest ISM data in the US which showed a fifth month of contraction in manufacturing.

The reading reignited fears of recession in the world’s largest economy.

Meanwhile in China, the private Caixin services survey showed a slowdown in growth as employers started to lay off staff over fears of rising costs.

‘’Fresh worries about the health of the global economy have gripped markets after deep concerns rippled out from Wall Street over the risks of an American recession,” said Hargreaves Lansdown analyst Susannah Streeter.

“There could be an element of post-labour day holiday blues at work, but it appears concerns were prompted by weaker than expected US manufacturing data, highlighting the ongoing damage wrought on orders and output by high interest rates.”

“A significant loss of power in the US economy, combined with China’s ongoing struggles, has sparked nervousness about the global growth outlook. The latest snapshot on the services industry from China, the Caixin PMI numbers disappointed, with new order growth easing off, which has added to the pessimism.”

There was some brighter news from the Continent as the eurozone's private sector experienced its fastest growth in three months during August, driven by a stronger services sector, according to the latest Hamburg Commercial Bank (HCOB) eurozone composite purchasing managers’ index (PMI) on Wednesday.

The composite PMI rose to 51.0, up from 50.2 in July, marking a slight expansion in economic activity.

Growth was entirely down to the services sector, which posted a three-month high, while manufacturing continued its decline, shrinking for the 17th consecutive month.

In equity news, shares in semi-conductor makers ASML, BE Semiconductor and ASM International all fell in response to a slump in US sector peer Nvidia’s stock price on Wall Street overnight.

"A near 10% collapse in Nvidia shares helped turn a bad day into an awful one for the markets, although the belated announcement that the DoJ had issued a subpoena to the firm for an antitrust investigation at least does provide some basis for such a dramatic move," said Scope Markets analyst Joshua Mahony.

"While many tech companies have long positioned themselves to necessitate consumers to solely use their products, there is a feeling that Nvidia does not have a history of abusing their monopolistic position. Nonetheless, markets find themselves in a unstable position as we await further evidence on the health of the economy, and the lofty valuations attached to many of these big tech names will put them in the firing line when it comes to trimming back on equity positions."

Reporting by Frank Prenesti for Sharecast.com