Europe open: Shares slump as recession fears return

European shares fell sharply at the open 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 in early deals 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.”

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.

Reporting by Frank Prenesti for Sharecast.com