European stocks slip as China data dampens growth outlook
The U.S. Federal Reserve is scheduled to meet this week, with traders betting on a 50-basis-point rate hike to combat rapid inflation. Overall, worries over China's rigid COVID-19 restrictions, the Ukraine conflict and an aggressive U.S. monetary policy tightening have stoked concerns of a sharp slowdown in the global economy, pulling the STOXX 600 down 8.5% on a year-to-date basis.
European stocks fell in light trade on Monday, pressured by heavyweights such as Mercedes-Benz trading ex-dividend, and as crucial China data-fuelled market speculation of a sharp slowdown in the world's second-largest economy. The pan-European STOXX 600 index dropped 1.8%, set to snap a three-day session of gains, although trading volumes were thinned by a UK bank holiday.
Ex-dividend factors weighed heavily on the STOXX 600, with automaker Mercedes-Benz, healthcare company Bayer, auto parts maker Continental, and chemical group BASF all losing their payout attraction. Data released last weekend showed China's factory activity contracted more than feared in April as widespread COVID-19 lockdowns halted industrial production and disrupted supply chains.
China-linked sectors such as autos, luxury, chipmakers, and industrials dragged on the main index. "While we can expect further supportive measures from Beijing over the coming months, the virus restrictions would likely pose a downside bias to the economic activities," Commerzbank analysts said in a note. "All told, the growth outlook still looks challenging."
Wall Street ended sharply lower on Friday, with the tech-heavy Nasdaq marking its lowest close in nearly a year as Amazon slumped following a gloomy quarterly report, and the biggest surge in inflation since 2005 spooked investors already worried about aggressive interest rates. The U.S. Federal Reserve is scheduled to meet this week, with traders betting on a 50-basis-point rate hike to combat rapid inflation.
Overall, worries over China's rigid COVID-19 restrictions, the Ukraine conflict, and an aggressive U.S. monetary policy tightening have stoked concerns of a sharp slowdown in the global economy, pulling the STOXX 600 down 8.5% on a year-to-date basis. There were also worries that EU countries, including Europe's gas-reliant economic powerhouse Germany, could stop using Russian gas following Moscow's attack on Ukraine.
Among other single stocks, wind turbine maker Vestas dropped 6.2% after it slashed its full-year operating profit margin outlook due to the Ukraine conflict and writedowns in its offshore business. German real estate group Adler Group SA slumped 45.4% to a record low as it said all members of its board of directors had offered to resign with immediate effect after an auditor declined to give an opinion on the company's financial statements.
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