European stocks slid for the first time in four days after a worse-than-forecast report on U.S. services raised concern about the strength of the world’s biggest economy.
The Stoxx Europe 600 Index lost 0.3 percent at the close, erasing a rise of as much as 0.3 percent, after data from the Institute for Supply Management showed U.S. services industries expanded in August at the weakest pace in six years. Bets for a Federal Reserve hike fell further after the report, with traders now pricing in only a 24 percent chance of higher rates this month.
Europe’s benchmark moved higher for the past three days, surging on Friday after U.S. data signaled the labor market is holding steady without strengthening the case for an imminent rate increase.
“Investors had built some recovery hopes and now data are pointing in the other direction,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “It adds to downside risks globally and we have had increasing fears about the global economy. Markets had gotten a bit ahead of fundamentals.”
Investors are also awaiting Thursday’s European Central Bank meeting. Most economists predict President Mario Draghi will lengthen quantitative easing for a second time, while leaving interest rates unchanged. At the last meeting in July, Draghi said officials have shown they can adjust QE when required, that there should be no doubt they can stick to their pledge to keep spending 80 billion euros ($89 billion) a month until March 2017 “and beyond if needed.”
Data today showed a mixed picture of the economy: while a report showed a surge in euro-area exports in the second quarter, another showed German factory orders increased less than forecast in July.
“There is uncertainty on the ECB and on the Fed,” said Philippe Gijsels, chief strategy officer at BNP Paribas Fortis in Brussels. “The consensus is the ECB is going to expand the asset purchase program by six more months, prolonging it until September 2017. The market is a bit nervous because there are still a few questions and rumors, and that’s putting a bit of pressure.”
Germany’s DAX Index rose as much as 0.7 percent, almost erasing its annual drop, before paring gains following the U.S. data. Fresenius SE climbed 6.4 percent after the health-care provider said it will pay $6.42 billion for Spain’s largest private hospital company, IDC Salud Holding S.L.U.
Banks fell the most among Stoxx 600 groups, while energy producers reversed an earlier advance to become the second-biggest losers.
Ingenico Group SA slumped 14 percent after the electronic payments processor lowered its annual profit margin and revenue growth forecasts. OCI NV slid 6.9 percent after the fertilizer producer reported a decline in first-half revenue.