Banks, chipmakers drag European stocks lower on growth worries

(Reuters) -European stocks struggled on Monday after their worst weekly showing since February, hit by a growing number of risks including signs of inflation, elevated bond yields and developer China Evergrande’s financial troubles.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 29, 2021. REUTERS/Staff

The pan-European STOXX 600 index fell 0.5%, holding near a two-month low hit in last week’s selloff.

Banks, chipmakers and luxury stocks were the top decliners on fears of a slowdown in global growth, as China, the world’s second largest economy, deals with fresh COVID-19 restrictions, a property sector slowdown and regulatory clampdowns.

French luxury goods makers Kering and LVMH, which draw a major portion of their revenue from the country, fell 1.2% and 0.8%, respectively.

A survey showed investor morale in the euro zone fell to its lowest level since April in October on dimming economic expectations.

STOXX 600 has dropped 5% from a record high hit in August due to signs of slowing growth and inflation. BofA Global Research last week predicted a nearly 10% drop by year-end, given a shift in the macro backdrop towards “anti-goldilocks”.

“Once the disappointment of growth not being as high as was hoped at this stage fades, we should still be left with decent growth,” said Deutsche Bank strategist Jim Reid. “I’m not convinced that growth is rolling over enough for stagflation to be the best description of the outlook for the next 12 months.”

Morrisons dropped 3.8% after U.S. private equity firm Clayton, Dubilier & Rice (CD&R) won the auction for Britain’s supermarket group with a 7 billion pound ($9.5 billion) bid.

Rivals Tesco and Sainsbury gained 1.6% and 3.6%, helping UK’s FTSE 100 stay afloat. [.L]

UK telecoms group BT Group fell 5.3% after media report said Sky was closing in on broadband investment deal with Virgin Media O2, which analysts at Jefferies said could threaten BT’s Openreach.

BT expects Sky to need to use the telecom provider as its partner for full fibre services, a person familiar with the situation told Reuters.

Airline stocks including Ryanair, British Airways-owner ICAG and Wizz Air rose between 0.1% and 2.6% following report that the UK will open up more countries for hotel quarantine-free travel later this week.

Some of the defensive sectors which tend to decouple from economic outlook including healthcare and food & beverages were the top gainers.

Last week, data showed an experimental antiviral pill developed by drugmaker Merck could halve the chances of dying or being hospitalized for those most at risk of contracting severe COVID-19.

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