European Equity Benchmarks Close Lower led by Falling Tech, Health Care, Luxury Goods Stocks
The broad-based major European indices closed lower in Monday trading as technology, health care, and luxury goods stocks led the markets into negative territory to start out the week.
In economic news, future sentiment in the euro area hit the lowest since June 2013, down to a four-year low in services, and tied for a six year-low in manufacturing, according to IHS Markit’s global business outlook for 2019. The firm said profit expectations are the bleakest in four years.
The outlook found sentiment at five-and-a-half-year lows in Italy and Spain, a four-year low in Germany, a two-year low in France, and a six-year low in Ireland, although selling price expectations remain elevated by historical standards, and are unchanged since the summer.
“Despite easing, Germany reports the highest degree of inflationary expectations, followed by France, where the future output prices gauge hit the highest since June 2011,” said IHS Markit.
“While eurozone capex intentions have edged higher, hiring intentions have pulled back to a two-year low.”
It also said that uncertainty regarding Brexit is a key factor driving UK business optimism to its lowest since comparable data became available in 2009, while profits expectations have sunk to the lowest since June 2017. Optimism in the UK has sunk to the lowest since October 2011 in manufacturing and its lowest since June 2010 in services. The firm also noted that UK companies planning to expand often cite new products and hopes of a good Brexit deal, while perceived threats include Brexit uncertainty, currency volatility, higher interest rates, a global economic slowdown, trade wars, rising prices, weak consumer spending plus skills and supply shortages.
Meanwhile Eurostat, the statistical office of the European Union, reported that seasonally adjusted production in the construction sector increased 2.0% in the euro area (EA19) in September compared with August, and by 1.7% in the EU28. In August, production in construction fell 0.6% in the euro area and 0.5% in the EU28. Compared with September 2017, production in construction increased 4.6% in the euro area and 4.2% in the EU28.
In the UK, November survey data pointed to further negative sentiment toward current financial conditions faced by UK households, accoding to the IHS Markit Household Finance Index (HFI) — which measures households’ overall perceptions of financial wellbeing. The index posted 44.5 for the month, down from 45.0 in October, which marks the greatest degree of pessimism since June.
“Households still deem current financial conditions to be skewed to the downside,” said Joe Hayes, economist at IHS Markit. “Expectations are for a rebound however, with projections towards financial wellbeing over the coming year at their most optimistic since the start of 2015.”
And in Germany, the price adjusted stock of orders in manufacturing in September rose a seasonally and calendar adjusted 0.8% from the previous month, according to the Federal Statistical Office (Destatis). The domestic orders not yet completed increased 1.0% from the previous month, and the stock of foreign orders rose 0.7%. The stock of orders comprises the total of new orders received by the end of the reference month, which have not led to any turnover and have not been cancelled by that time.
Unfilled orders for producers of intermediate goods in September were 0.5% higher than the previous month, while the producers of capital goods recorded an increase of 0.9%, and consumer goods stock was up by 0.1%.
In equities, industrial equipment rental company Ashtead Group, and chemicals company Johnson Matthey led the FTSE lower in London, falling 4.3% and 4.1% respectively, followed by online food ordering company Just Eat, and packaging company Smurfit Kappa Group, which were off 3.8% and 3.3%. Tobacco and consumer goods company Imperial Brands was down 3%, while online supermarket Ocado Group closed 2.4% lower.
In Frankfurt, tech and health care stocks weighed down the market as internet company Wirecard, and software firm SAP fell 7% and 3% respectively, while health care company Fresenius, and kidney dialysis company Fresenius Medical Care were down 2.9% each. Stock market operator Deutsche Borse fell 2.4%, while footwear and apparel company Adidas, and industrial group Thyssenkrupp each closed 1.9% lower.
In Paris, automaker Renault led the CAC lower, falling 8.4%, followed by software company Dassault Systemes, and eyewear company EssilorLuxottica, which lost 3.3% and 2.3% respectively. Luxury goods companies Louis Vuitton, and Kering were down 1.9% and 1.8%, while IT firm Atos, and luxury goods company Hermes International each closed 1.7% lower.
The FTSE lost 0.19%, the DAX dropped 0.85%, and the CAC-40 fell 0.79%.
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