(Bloomberg) -- European stocks fell, paring some of Thursday’s gains that carried the regional benchmark close to a record high, as autos weighed on the broader market.
The Stoxx Europe 600 Index declined 1.4% by the close in London. Most sectors dropped Friday, led by autos, technology and luxury stocks, while utilities and telecoms were the only sectors in the green.
Among individual stocks, Mercedes-Benz Group AG dropped after the company cut its financial forecast for the year. The carmaker cited a rapid deterioration of its business in China, marking the latest blow to Germany’s struggling industrial sector. Luxury shares were among the worst performers after analysts at Jefferies International Ltd. and Goldman Sachs Group Inc. cut estimates.
European delivery companies including Deutsche Post AG and International Distribution Services Plc were also under pressure after US operator FedEx Corp. warned its business would slow in the year ahead.
The Federal Reserve’s rate cut earlier this week had sent European stocks back near their record highs, and strategists surveyed by Bloomberg expect the rebound to continue. Still, worries linger and strategists believe volatile conditions could remain in place in the short term.
“We are currently transitioning into the historically volatile part of the month of September, known for its market turbulence,” said Florian Ielpo, head of macro research at Lombard Odier Investment Managers.
The economy remains the wild card, with manufacturing data in Europe continuing to show contraction. That raises question of whether defensive stocks’ outperformance over the past few months is running out of steam.
Despite markets’ recent positive performance, sentiment indicators such as the VIX and CDS spreads have yet to signal a clear green. “We are not there yet,” said Ielpo. “This suggests that investor confidence might not have fully rebounded, and a degree of wariness remains advisable.”
STOCKS TO WATCH:
- UK retailers may be active on Friday after data showed that retail sales picked up pace in August, with consumers splashing out on food and clothing to take advantage of sunny weather.
- European delivery companies may be active on Friday after US operator FedEx warned its business would slow in the year ahead and reported a worse-than-expected quarterly profit.
For more on equity markets:
- An End-of-the-Year Rally Is Shaping Up in Europe: Taking Stock
- M&A Watch Europe: Esker, Grifols, Commerzbank, Volution
- Europe’s Flurry of Block Trades Gets Support From Fed: ECM Watch
- US Stock Futures Unchanged; FedEx, MillerKnoll Inc, Lennar Fall
- Happy Shoppers: The London Rush
You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP key for assistance. To subscribe to a daily list of European analyst rating changes, click here.
--With assistance from Sagarika Jaisinghani and Michael Msika.
©2024 Bloomberg L.P.
