Europe Shares Drop as Disappointing China, U.S. Data Damp Mood

European Stocks: New Month, Same Old China
  • China factory gauge falls to three-year low in January
  • U.S. manufacturing index contracts to weakest since 2009

European stocks retreated as deteriorating Chinese and U.S. data dented the investor optimism that helped trim January losses last week.

The Stoxx Europe 600 Index slid 0.2 percent to 341.61 at the close, paring earlier declines of as much as 1.2 percent in late trading. The gauge posted its worst January drop since 2008 amid concerns about China’s slowdown and an oil rout. While stimulus from the Bank of Japan and speculation of added measures by the European Central Bank tempered some losses in the past two weeks, anxiety over global growth is returning to the fore.

“Investors are getting conflicting signals about global growth,” said Daniel Murray, London-based head of research at EFG Asset Management. “It’s all very confusing and it’s making people nervous. Even the smallest macro event or data point can tip sentiment either way.”

The Stoxx 600 briefly extended losses after a report showed manufacturing in the U.S. shrank in January for a fourth consecutive month and missed estimates as businesses cut staffing plans. Shares fell earlier as China’s official factory gauge dropped to a three-year low in January, missing forecasts and signaling a record sixth straight month of deterioration. The official services index also slipped. 

European stocks have underperformed global equities since reaching a record in April. This was exacerbated in January, as all Stoxx 600 industry groups lost ground, with banks, miners and auto companies the hardest hit. Among national benchmarks, Italy’s FTSE MIB posted the biggest drop, losing 13 percent last month. Germany’s export-heavy DAX Index slid 8.8 percent, for its largest monthly decline since August.

“It’s common to get a bounce when markets fall this far this quickly, but occasionally you get a rollover, and that’s the challenge now,” said Murray. “The longer this cycle goes on, the closer you get to the next recession.”

Nokia Oyj dragged a gauge of technology stocks to biggest decline of the 19 industry groups on the Stoxx 600, tumbling 11 percent after investors were disappointed by a court decision in a patent dispute with Samsung Electronics Co. Alcatel-Lucent SA lost 12 percent.

Energy-related shares were also among the worst performers as the price of oil slid, with service provider Seadrill Ltd. leading declines.

Luxottica Group SpA fell 5.7 percent after quarterly sales missed analysts’ projections. The maker of Ray-Ban eyeglasses also said its co-Chief Executive Officer resigned.

Ryanair Holdings Plc led a measure of travel and leisure companies to the best performance on the Stoxx 600, gaining 5.5 percent after forecasting fourth-quarter traffic will grow more than previously expected and saying it will return 800 million euros ($868 million) to investors via a share-buyback program.

BT Group Plc pushed an index of telecommunications shares higher, rising 1.9 percent after quarterly profit beat estimates.

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