(Bloomberg) -- European stocks retreated with the auto sector leading losses following BMW’s outlook cut. Investors were also cautious ahead of US inflation data and the European Central Bank’s meeting.
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The Stoxx Europe 600 Index dropped 0.5% by the close. The autos sector fell 3.8% to the lowest in almost a year as BMW flagged component supply issues. Energy and banks also declined, while real estate, and food and beverage outperformed.
Capgemini shares jumped after Bank of America Corp. analysts upgraded the IT firm to buy from neutral, saying the risk of a guidance reset had played out following a profit warning in July.
After advancing last month, the Stoxx 600 has stumbled again in September as weak economic data rekindled worries about a recession. Sectors linked to the economic cycle — or so-called cyclicals — have underperformed defensive peers since the end of May.
The economic outlook suggests cyclical stocks are facing further declines. Manufacturing PMIs, typically a proxy for the group, are still deeply in contraction territory both in the US and in Europe, with no clear sign of improvement.
Sentiment is likely to be impacted by the upcoming US presidential debate later Tuesday, the US consumer price report Wednesday and the ECB’s meeting Thursday, where the central bank is expected to cut interest rates for a second time this year.
“We expect that volatility remains higher until the US election as investors want to wait for certainty until they make big decisions,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. There’s also “some surprise potential” based on the ECB’s signals about future rate decisions, he added.
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--With assistance from Michael Msika.
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