Economic news

Defensives Buoy European Stocks after Six-Day Losing Run

  • STOXX recovers some ground
  • Miners, tech lead losses
  • German industrial orders fall in July

Sept 7 (Reuters) - European shares inched higher on Thursday after a six-day losing run, with defensive healthcare and utilities in the lead, as investors grappled with the prospect of U.S. interest rates staying elevated and a sharply slowing European economy.

The pan-European STOXX 600 index edged up 0.2%, having fallen as much as 0.5% earlier in the session.

Investors bought into defensive sectors such as utilities and healthcare, considered relatively immune to economic cycles, while selling mining and energy stocks after economic data this week highlighted slowing business activity in Europe and China.

"Equity markets will remain under pressure in the coming months. The story in Europe is stagnation and possibly recession," said Rupert Thompson, chief economist at Kingswood Group.

"The weakness in activity means the market is pricing the end of rate hikes and it's pretty unlikely the European Central Bank (ECB) is going to shock the market by raising rates this month."

Adding to the grim economic picture, data showed German industrial production fell slightly more than expected in July.

Interest rate futures imply investors are pricing in a 64% chance that the ECB will hold interest rates next week even as policymakers warned recently that the decision was still up in the air and a rise in rates was among options on the table.

With economic activity declining across the 20 countries that use the euro and inflation easing, investors are betting the ECB will end its streak of nine consecutive rate increases on Sept. 14, even if it keeps the door open to further moves.

Meanwhile, the Federal Reserve is widely expected to keep rates steady at its meeting later this month but stronger-than-expected U.S. economic data this week fed into expectations that borrowing costs will remain higher for longer.

Miners fell the most in Europe, down 1.6%, as prices of most metals fell against a strong dollar.

Tech shares dropped 0.8%, hurt by a report that China is seeking to broaden its iPhone ban to state firms and agencies.

Apple fell more than 2% in U.S. premarket trading, while European suppliers such as Ams , STMicroelectronics and Infineon fell between 1.2% and 1.8%.

However, a bright spot appeared as Direct Line Insurance Group's shares surged 17.4% after the British motor and home insurer forecast better operating profit in 2024.

Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Sonia Cheema

Source: Reuters

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