European stocks down to their lowest in a week
On Tuesday European stocks fell to their lowest level in a week as a surge in government bond yields hit high-growth technology shares, with new signals of a slowdown in China’s economy weighing on investor sentiment.
The pan-European STOXX 600 index fell by 1.3%, dropping for a third session as a rise in U.S. Treasury yields showed that investors were getting ready for higher rates and the risk of persistent inflation.
Technology stocks dropped 3.7% to reach a one-month low after their Wall Street peers fell overnight. They are particularly sensitive to increasing interest rate expectations as their value rests heavily on future earnings, which are discounted more deeply when rates go up.
Meanwhile, data indicated profit growth at China’s industrial firms slowed for a sixth month in August, with a growing power crisis becoming a growing threat to output and profits.
The weak sentiment across markets outshone a survey that illustrated the mood among German consumers improved unexpectedly moving into October.
Germany’s DAX dropped by 0.9%, France’s CAC 40 fell 1.5% and Britain’s FTSE 100 lost 0.6%.
While the benchmark STOXX 600 is on course to extend its quarterly winning run, a volatile September took some shine off its third-quarter gains as investors priced in risks of easing global growth momentum and tighter monetary policies.
European Central Bank chief Christine Lagarde said on Monday inflation in the euro zone could surpass its already increased projections, while Federal Reserve Chair Jerome Powell said the central bank would move against unchecked inflation if needed.
However, a rise in Brent crude futures above $80 per barrel continued to support energy stocks, with the oil and gas index gaining 0.9% to new highs since February 2020.
Swiss computer peripherals maker Logitech fell 8.0% as Morgan Stanley downgraded the stock to “underweight”. Dutch semiconductor supplier ASM International dropped 4% despite raising its third-quarter order intake guidance.