European stocks slip on Evergrande woes

European stocks fell on Friday as worries about troubled property developer China Evergrande and weak German business confidence data prompted investors to book some profit after a mid-week rally.

European sportswear makers Adidas, Puma and JD Sports fell about 3 per cent each after US rival Nike cut its fiscal 2022 sales expectations and predicted delays during the holiday shopping season due to a supply chain crunch.

Retail stocks were the top decliners in Europe, down 1.5 per cent, while the region-wide STOXX 600 fell 0.8 per cent. But a three day rally put the index on course for small weekly gains.

“Equities have rallied to take a pause early this morning faced with the likely default of Evergrande,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Investor worries over Evergrande resurfaced as a deadline for paying $83.5 million in bond interest passed without remark from the company, putting it closer to a potential default.

Meanwhile, a survey by Ifo Institute showed German business morale in September fell for the third straight month, hit by supply chain woes that are causing a “bottleneck recession” for manufacturers in Europe’s largest economy.

Germany’s DAX fell 0.8 per cent, heading into the weekend when the country will vote to elect German chancellor Angela Merkel’s successor. Latest poll showed support for the conservative CDU/CSU alliance, while the Social Democrats are clinging to their lead.

“Although there is much noise surrounding the outcome, the possible coalition permutations are labyrinth and will almost certainly not be clarified on Monday or next week,” said Jeffrey Halley, senior market analyst at OANDA.