(Bloomberg) -- European stocks extended losses on Monday, weighed down by automakers after Volkswagen AG and Stellantis NV warned on profits.
The Stoxx Europe 600 Index fell 1% at the close in London after hitting a new record high last week. Automakers and travel and leisure stocks fell the most, with most sectors in negative territory. The gauge extended declines after Bloomberg reported that Germany’s government is poised to cut its forecast for growth, and now expects no expansion at all in 2024.
Stellantis shares were among the worst performers on the broader benchmark, plunging as much as 15% after the company slashed its profit margin forecast, while Volkswagen also fell after it cut its guidance. Adding to the gloom, sports car maker Aston Martin Lagonda Global Holdings Plc slumped as much as 28% after lowering its outlook.
Chinese stocks surged overnight, extending one of their most remarkable turnarounds in history, after the country introduced its latest stimulus measures. That benefits European sectors exposed to China, such as miners and luxury shares, though the bar is high for meaningful share-price gains.
European stocks hit new record highs last week, capping off the best quarter since March for the region. Still, a slew of risks await European stocks in the fourth quarter, including corporate earnings and rising tensions in the Middle East.
European markets will remain in wait-and-see mode this week as China goes on holiday, according to Joachim Klement, head of strategy, economics and ESG at Panmure Liberum, putting the focus firmly back on manufacturing and inflation data published later this week.
German inflation eased below the European Central Bank’s 2% target for the first time since February 2021 — supporting the case for another cut in interest rates in less than three weeks.
Further cementing this view, Christine Lagarde said the European Central Bank is becoming more optimistic about getting inflation under control, and will reflect on that at its October decision on interest rates.
Traders are increasing bets for an October cut scenario for the ECB and bracing for a data-heavy week, with Eurozone inflation due on Tuesday. US payroll numbers will also be carefully watched.
For more on equity markets:
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- US Stocks Slip as Risk-On Mood Put on Pause: Markets Wrap
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