European Stocks Fall to Lowest Since February in a Broad Selloff

This content was published on August 5, 2024 - 18:15

3 minutes

(Bloomberg) — European stocks dropped, sending a regional benchmark to the lowest since February, amid a deepening global retreat sparked by concerns of a US economic slowdown.

The Stoxx Europe 600 Index fell 2.2% by the close in London. The index pared some of its losses after data showed the US services sector expanded in July. All sectors declined, with utilities, real estate and energy shares sinking the most.

The index had fallen as much as 3.6% during the session, the steepest intraday drop since March 2022. The moves extended last week’s selloff fueled by investor fears around a US recession. France’s CAC Index has now fallen more than 10% from its recent peak, the technical definition of a correction.

“The magnitude of the sell-off has certainly caught people by surprise,” said Richard Saldanha, global equity fund manager at Aviva Investors, adding that the jobs data in the US was certainly not dire. “We expect markets to remain turbulent as people assess what the next moves from central banks will be.”

A weaker-than-expected US job data on Friday reignited recession fears, with traders assuming the Federal Reserve was now behind the curve in cutting rates. Technical factors including lower liquidity during summer months, as well as an extremely elevated stock exposure until July likely played a part in the selloff. In Asia, the MSCI Asia Pacific Index sank 6.3% and now is down 12% from its recent peak on July 11. In another sign of souring investor sentiment globally, Bitcoin slumped about 6%.

“Positioning was extreme under every systematic fund, and this story was to me unsustainable,” said Alberto Tocchio, portfolio manager at Kairos Partners. The selloff “will create a lot of opportunities. I don’t think there is any bubble on technology or artificial intelligence. Eventually it’s just a matter of trying to not lose too much.”

Among single stocks, L’Oreal SA said it is buying a 10% stake in Swiss skincare company Galderma Group AG to benefit from its range of dermatological products. Both stocks ended the session in the green, outperforming the broader market.

For more on equity markets:

Bad News Is Bad Again as Recession Risks Resurface: Taking Stock
M&A Watch Europe: SocGen Sells to UBP; L’Oreal Galderma Stake

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–With assistance from Sagarika Jaisinghani, Lisa Pham and Michael Hennessey.