European Stocks Trim Monthly Gains Amid Worries Over Stimulus
(Bloomberg) -- European equities fell on Tuesday amid renewed worries over potential curbs to central bank stimulus after data showed euro-area inflation surged to the highest in a decade.
The Stoxx 600 Index closed 0.4% lower, with telecoms and miners leading the retreat. The benchmark still posted a monthly gain, its seventh positive month in a row and the longest winning streak since 2013. The index hit a series of historical highs earlier this month, and is now about 1% away from its record.
Economic indicators damped sentiment, with data showing that euro-area inflation jumped to the highest in a decade in August. Comments from European Central Bank Governing Council member Robert Holzmann that the ECB should start discussing how to phase out its pandemic-era stimulus also weighed.
Investors are mulling what’s next for equity markets trading near record highs as Covid-19 stimulus measures have been an instrumental driver of the rally. A reduction in monetary support could mean there’s more volatility ahead for risk assets.
“It’s a headwind for equities as liquidity growth will slow, similar to what we expect from the Fed,” Hani Redha, a portfolio manager at PineBridge Investments, said. “But I wouldn’t expect a ‘tantrum’ in either case.”
Despite the turn lower on Tuesday, the backdrop for equities still looks rosy heading into September amid Europe’s vaccination push to curb the spread of the coronavirus.
Bernstein strategists led by Sarah McCarthy are positive on the region’s equities, saying that continued fiscal stimulus should support cheaper stocks in the short-term, remaining overweight European value.
Ackermans Gains, Airlines Fall on EU Curbs: EMEA Equity Movers
Among the most notable individual stock moves, U.K. wholesaler Bunzl Plc declined 1.6% following half-year results and an unchanged outlook, while biotechnology firm Galapagos NV rose 7.2% after announcing the planned retirement of its chief executive officer.
Deal-making was also in focus. Prosus NV was among the biggest gainers today, rising 6.4%, after agreeing to acquire Indian online payments service BillDesk for 345 billion rupees ($4.7 billion), making its largest global acquisition to date in the Asian nation. Arkema SA jumped 4.2% after agreeing to buy Ashland Global Holdings Inc.’s performance-adhesives business for $1.65 billion.
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