European Stocks Close Steady as Lagarde Warns of New Recession


European equities ended little changed as encouraging earnings reports were offset by ECB President Christine Lagarde’s warning that the euro-area economy is headed for a double-dip recession.

The Stoxx 600 Index closed flat, undoing gains of as much as 0.8%. Technology stocks and other sectors more sensitive to the economy, like automakers and retail, outperformed. Real estate and energy shares were among the biggest decliners on Thursday.

The region’s equity benchmark began paring gains as the euro rallied, after the European Central Bank decided to keep interest rates and stimulus efforts unchanged. Lagarde said the euro-area economy probably contracted at the end of last year, meaning that the bloc may be headed for a double-dip recession.

European Stocks Close Steady as Lagarde Warns of New Recession

“No change from the ECB is no surprise,” Neil Birrell, chief investment officer at Premier Miton Investors, said in emailed comments. “Confirmation of the Pandemic Purchase Programme and maintaining the stimulus after the December boost is good news.”

The Stoxx 600 usually reacts negatively to the euro’s strength because of the extensive presence of exporters, whose revenue in local money shrinks when the European currency gains against the greenback.

Among individual stocks, ASML Holding NV gained 3.8%, as analysts hiked their targets on the semiconductor equipment maker, while New Street upgraded the stock to buy from neutral. Bankinter SA shares rose 4.3% after the Spanish lender’s results beat estimates.

But, BP Plc and Total SE retreated after oil slid, as worsening global coronavirus outbreaks suggest a long road ahead for a recovery in consumption.

Investors in European equities are mulling the outlook for the equities market as it nears a record high and as major regional economies remain in lockdown, despite the ramping up of vaccination efforts.

“We have to be constructive in terms of the backdrop to the global economy accelerating by around 5% this year -- we expect earnings to grow over 20%, which will put us back somewhere near 2019 levels,” Brian O’Reilly, head of market strategy at Mediolanum International Funds, said by phone. “And the biggest drivers of that catch-up will be the industry and sectors that were hurt last year.”

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