Trade fears and weak economic data hurt European stocks

European shares fell on Thursday as US-China trade talks turn sour and eurozone business growth fails to meet expectations.

Trader stock exchange Source: Bloomberg

European stocks tumbled on Thursday as investors grow increasingly skittish over US-China trade frictions and weak eurozone business growth data.

The pan-European Stoxx 600 fell more than 0.8% on Thursday morning, with Germany’s DAX sliding more than 1.1%, with similar declines seen across major Asian indices as global investors fear that US-China trade talks have grown into a technological cold war.

Eurozone economic growth remains ‘subdued’

The pace of eurozone economic growth remained subdued in May due to stagnant demand, leading to jobs growth sliding to the joint-lowest the bloc has witnessed since 2016 as businesses hold back on investment as a result of weak sales, according to the latest IHS Markit Flash Purchasing Managers Index (PMI).

‘A renewed deterioration in optimism about the year ahead suggests that the business situation could deteriorate further in coming months,’ Chief Business Economist at IHS Markit Chris Williamson said.

‘Worries reflected concerns over lower economic growth forecasts, signs of weaker sales and rising geopolitical uncertainty, with escalating trade wars and auto sector woes commonly cited as specific causes for concern,’ he said.

Germany, the eurozone’s largest economy, is on course for just a 0.2% expansion of GDP in its sector quarter, while the situation is even worse for France, with the country’s economy expected to grow by just 0.1% over the same period.

‘However, the bigger concern is for the rest of the region, which collectively saw growth falter amid the first fall in orders for almost six years,’ Williamson added.

Investors grow increasingly anxious over US-China trade war

Last week, President Donald Trump signed an executive order that blocked US companies from working with or purchasing goods from foreign made telecoms businesses deemed a threat to national security.

Despite the executive order no naming any specific companies, it is widely believed to be aimed at China-based Huawei, with US officials concerned about the Chinese government forcing the smartphone manufacturer to install backdoors in its devices to spy on US networks.

Because of the order, Google was forced to Huawei, with British chip maker ARM joining a growing list of companies are under obligation to comply with the US trade ban on the Chinese firm.

As the world’s two largest economies slug it out and their trade war rages on, investors risk appetite continues to diminish and apply downward pressure on global stocks, hinder trade demand and hurt economic growth.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.