European Stock Markets Retreat

Investing.com – European stock markets retreated Monday, the last day of September, as investors digested a series of local economic releases along with the differing performances of the major Asian indices.

At 03:05 ET (07:05 GMT), the DAX index in Germany traded 0.3% lower, the CAC 40 in France fell 0.5%, and the FTSE 100 in the U.K. dropped 0.12%.

Differing Asian Influences

The tepid start to the week comes after the benchmark pan-European Stoxx 600 index closed at a fresh record high on Friday, boosted by China’s announcement last week of a range of stimulus measures aimed at bolstering the world’s second-largest economy, which is a major export market for Europe’s largest companies.

Major Chinese stock indices posted strong gains Monday, including Hong Kong’s Hang Seng index soaring over 4%, after China’s central bank announced it would instruct banks to lower mortgage rates for existing home loans before Oct. 31. This is part of a series of aggressive stimulus measures designed to support China’s struggling property market.

However, Japan’s Nikkei index fell almost 5% as investors anticipated higher interest rates under new Prime Minister Shigeru Ishiba, a long-time critic of the Bank of Japan’s highly accommodative policies. Additionally, Japan’s industrial production dropped by 3.3% month-on-month in August, while housing starts declined by 5.1% year-on-year.

UK Growth Revised Lower

Back in Europe, data released earlier Monday indicated that the British economy grew by 0.5% in the second quarter, slightly below the preliminary estimate of 0.6% for gross domestic product growth. Compared to Q2 2023, the economy grew by 0.7%, which is lower than economists’ forecasts of a 0.9% rise.

German inflation data is expected later in the session, predicted to show rising prices are below the European Central Bank’s 2% medium-term target. The ECB cut interest rates earlier this month, and speculation is growing that the central bank may ease monetary policy again in October as slowing growth coincides with cooling inflation.

Stellantis Cuts Annual Guidance

In the corporate sector, Stellantis (EPA:STLAM) stock fell over 6% after the French-Italian carmaker reduced its annual guidance, citing a deterioration in global industry dynamics and increased competition from Chinese electric vehicles. Meanwhile, British luxury carmaker Aston Martin (LON:AML) warned of reduced annual core profit and no longer expects positive free cash flow in the first half, attributing this to supply chain disruptions and weakness in China.

Crude Rises on Middle East Tensions

Oil prices increased Monday amidst possibilities of a widening conflict in the Middle East following Israel’s intensified attacks on Iranian-backed Hezbollah and Houthi militant groups. By 03:05 ET, the Brent contract rose 1.2% to $72.44 per barrel, while U.S. crude futures (WTI) traded 1.1% higher at $68.94 per barrel. Israel reported bombing Houthi targets in Yemen and recently killed Hezbollah leader Sayyed Hassan Nasrallah, escalating tensions in Lebanon. Both contracts experienced declines last week as concerns regarding demand increased after China’s fiscal stimulus, despite being the world’s second-biggest economy and top oil importer, failed to bolster market confidence.