Europe close: Stocks fall as risk appetite slides
European stock markets started the new week on the back foot, with the Stoxx 600 retreating from a four-week high, as investors scaled back risk appetite and poured into safe-haven assets like gold.
After brief stint in positive territory early on, the Stoxx 600 closed down 0.7% at 521.52, with losses of 1% registered in both Frankfurt and Paris.
The pan-European benchmark index finished Friday’s session at 524.99, its highest since 27 September when it closed at a record high of 528.08.
Additional stimulus measures in China failed to lift sentiment in Europe – and even in China where stocks fell overnight. The People’s Bank of China reduced both the one-year and five-year loan prime rates in a move that will hopefully encourage lending and spending to help rebuild a struggling property market.
“The issue here is that while there’s been an immediate easing in monetary policy, following the announcement of measures designed to shore up China’s troubled economy, the Chinese authorities have failed to provide details of the promised fiscal stimulus. Markets are likely to remain under pressure until investors see some follow-through here,” said David Morrison, senior financial analyst at Trade Nation.
The economic data calendar was relatively quiet on Monday, with the only major release of the day being Germany’s producer price index for September. Wholesale prices were 0.5% lower during the month, their first fall in seven months, while the annual rate of deflation picked up to 1.4% from 0.8% previously.
Over in the US, markets opened lower as the Dow and S&P 500 pulled back from record highs ahead of a busy week for corporate earnings, with 112 S&P 500 constituents scheduled to report results, including heavyweights like Tesla, Coca-Cola and IBM.
Mining stocks outperform
Precious metal miners were outperforming markets as gold prices rose to a record high. London-listed Fresnillo, Hochschild Mining, Centamin and Endeavour Mining were putting in decent gains with gold up 0.8% at $2,751.30 an ounce, while silver was trading at its highest levels in more than a decade.
"Safe-haven assets are in demand as conflict continues to wrack the Middle East and concerns persist about a slowdown in global growth," said Susannah Streeter, head of money and markets at Hargreaves Lansdown. "The uncertain outcome of the US presidential election is also likely to be playing on minds and leading to more defensive positioning," she added.
Similarly, oil prices jumped 1% with Brent up $0.72 at $73.77 a barrel, helping shares of BP, Shell, Repsol and TotalEnergies higher.
After rising early on, luxury stocks dropped into the red by the close as increased hopes over Chinese stimulus boosting demand quickly faded. Burberry, Kering, LVMH and Christian Dior all dropped.
Intertek was a heavy faller in London after RBC Capital Markets downgraded the lab testing company to ‘sector perform’ from ‘outperform’, saying the stock “now trades at what we deem to be fair value”.
Meanwhile, shares in JDE Peet’s surged 16% in Amsterdam after German investment company JAB bought out part-owner Mondelez for €2.2bn on the same day the Dutch coffee and tea maker appointed a new chief executive. JAB agreed to buy Mondelez’s remaining 86m shares for €25.10 a share, a 32% premium to the stock’s closing price of €18.96 on Friday.