European stocks down from recent highs

On Tuesday European stocks moved away from recent peaks as a series of transactions in the telecom sector led by Deutsche Telekom was counterbalanced by caution ahead of a European Central Bank meeting later this week.

The pan-European STOXX 600 index dropped 0.3% after coming close to a record high in the previous session. Utilities, media and chemical stocks were among the top decliners.

Encouraging moves in the telecom space, Deutsche Telekom reached a share-swap deal with Softbank Group to increase its investment in U.S. unit T-Mobile. The company and Swedish telecoms operator Tele2 also agreed to sell their Dutch unit to private equity groups for an enterprise value of 5.1 billion euros. Dutch peer KPN rose more than 4%, while UK’s BT gained 2% on news Deutsche Telekom is weighing options for its 12% stake in the company. The wider telecoms index gained 0.1%.

However, prudence reigned ahead of the ECB meeting on Thursday, with a recent rise in euro zone inflation and improving economic data driving bets of tighter monetary policy.

The benchmark STOXX 600 rose by almost 19% so far this year, marginally trailing New York’s S&P 500, as fairly high rates of vaccination improved the recovery outlook, with many people returning to offices following widespread restrictions last year.

Hopes of more economic stimulus for China and Japan, as well as growing views the U.S. Federal Reserve is expected to postpone the start of tightening its asset purchases pushed world stocks to record highs earlier.

Luxury stocks including LVMH, Richemont and Kering gained more than 1%. The world’s largest inter-dealer broker TP ICAP Group dropped 7% after recording a lower halfyear profit. Upmarket fashion retailer Ted Baker gained 2% as sales rose during the second quarter as customers returned to shops after months of coronavirus restrictions.