European shares fall on recession fears, weak earnings


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European shares fell on Thursday, after lackluster U.S. economic data and hawkish comments from central bankers rekindled fears of a global economic slowdown while downbeat corporate earnings at home soured investor appetite further.

The pan-European STOXX 600 was down 0.8% at 0929 GMT, and on track to snap a six-day winning streak.

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Industrials and luxury stocks such as LVMH and Richemont were the biggest drags amid a broad-based market slump.

Wall Street tumbled overnight after data showed that U.S. manufacturing output had slumped last month and retail sales dropped by the most in a year, while hawkish comments from Federal Reserve officials further weighed on the markets.

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Energy stocks fell 1.9%, tracking weakness in crude prices, after U.S. economic data stoked fears of recession in the world’s largest economy.

“Economic data remains noisy, making it hard to say for certain that the recent encouraging economic trends will continue,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“We still favor a selective stance, including a tilt towards defensive equity sectors, and high-grade and investment-grade bonds.”

Dutch central bank chief Klaas Knot added to the chorus, saying markets may be underestimating planned rate hikes by the European Central Bank and investors should take more seriously its forecast to raise rates in multiples of 50 basis points.

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While a 50-basis-point hike by the ECB for February is fully priced in, markets are oscillating between 25 and 50 for March on hopes of less-aggressive moves by the U.S. Fed.

Investors are focussed on minutes from last month’s European Central Bank meeting due later in the day, as well as an appearance from ECB President Christine Lagarde at the World Economic Forum in Davos.

Market focus was also on corporate earnings in the United States and Europe. Fourth-quarter earnings in Europe are expected to increase 10.7% year-over-year, according to Refinitiv I/B/E/S data.

Boohoo slipped 5% as the British online fashion retailer’s revenue fell 11% in its key Christmas trading period, hurt by delivery disruption and tough comparatives.

Dr Martens Plc slumped 23.6% after the British bootmaker warned on annual profit and revenue due to operational issues.

Renault slipped 2% as HSBC cut the French carmaker’s stock rating to “hold” from “buy.”

Bucking the downbeat trend, shares of Zur Rose rose 11.1% after the Swiss online drug retailer said it expected a smaller full-year core loss than previously forecast. (Reporting by Ankika Biswas and Bansari Mayur Kamdar in Bengaluru; Editing by Sherry Jacob-Phillips)


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