European stocks open and close as recession fears linger

LONDON – European shares were lower on Thursday as global markets saw renewed volatility after a brief rebound from last week’s turbulent trading.

The pan-European Stoxx 600 was down 0.5% by late morning after recouping more than half of its earlier losses. Banks fell 1.5% while travel and leisure stocks gained 1.1%.

In terms of individual stock price action, Aroundtown fell more than 7% to the bottom of the European blue-chip index after JPMorgan downgraded the real estate company’s stock to “underweight” and lowered its price target.

At the top of the index, French IT company Atos rose more than 10% after a French media report that the government would back a possible merger with aerospace company Thales.

European equities ended lower on Wednesday, reversing gains from previous sessions as global volatility continued and market sentiment turned more negative on concerns of rising inflation and slowing economic growth.

“Faced with challenges such as rising material and energy costs, industrial companies in Europe continue to struggle with constrained revenues and operational challenges.”

Thomas Rinnen

Global Industrial Lead, Accenture

US stock futures fell early Thursday after major indices slipped into the red at the close of regular trading and investors weighed the likelihood of a recession following comments from Federal Reserve Chair Jerome Powell.

Powell told Congress Wednesday that the central bank was “strongly committed” to bringing inflation down after the rate in the United States hit a 40-year high. He also noted that a recession is a “possibility” — a fear that continues to weigh on Wall Street.

Meanwhile, sentiment in Asia-Pacific markets was more mixed overnight as investors continued to watch recession concerns.

On the data front in Europe, flash estimates for French and German PMI (Purchasing Managers’ Index) readings for June came in weaker than expected, adding to recession fears.

Germany’s composite PMI, which tracks activity in manufacturing and services, fell to 52.0 from 54.8 in May, below a forecast of 54.0 by analysts in a Reuters poll. France’s composite was 52.8, down from 57.0 in May.

The broader euro-zone purchasing managers’ index also fell sharply to 51.9 in June, from 54.8 in May, while economists had forecast a reading of 53.9.

Thomas Rinn, global head of industry at Accenture, said the weak readings demonstrated the “uphill battle” facing the euro zone’s manufacturing sector.

“Faced with challenges such as rising material and energy costs, industrial companies in Europe continue to struggle with constrained revenue and operational challenges,” said Rinn.

“Although there are signs of a recovery in orders, it looks like inflationary pressures will persist and European manufacturers should prepare accordingly.”

Elsewhere, Norway’s central bank on Thursday announced a surprise 50 basis point hike in its key interest rate, the country’s largest single hike since 2002.

The move brings the policy rate to 1.25% from 0.75%, and Norges Bank Governor Ida Wolden Bache said in a statement it was likely to be raised to 1.5% in August.