European shares slipped into the red at midday on Thursday as data showed German factory orders were weaker than expected in August and the eurozone’s construction downturn continued last month.
The Stoxx 600 index was down 0.34%, having been up 0.76% in early deals after Wall Street staged a late rally.
Germany’s factory orders were weaker than expected in August, official data showed on Thursday, as the war in Ukraine continued to weigh heavily.
According to Destatis, the Federal Statistical Office, new orders in the manufacturing sector slid 2.4% on the previous month, and by 4.1% on August 2021. Analysts had been expecting a decline of around 0.7%.
In July, monthly orders rose by a revised 1.9% but fell 11% on an annual basis.
Destatis said that the sharp upwards revision for July – from a first estimate for a 1.1% decline – was related to large-scale orders in the aerospace sector, which were reported after the initial data were collated. Once large-scale orders were stripped, new orders rose by 0.8% in August.
The downturn in Eurozone construction continued at pace in September, a closely-watched survey showed, as prices rose and the weakening economic outlook weighed on demand.
The S&P Global Eurozone Construction Total Activity Index came in at 45.3, the fifth consecutive reading under 50. A reading above 50 indicates growth, while a reading below suggests contraction.
S&P Global said the survey had shown the fastest decline in new work since May 2020, and the weakest 12-month outlook since April 2020.
The total activity index was, however, a marginal improvement on August’s print of 44.2. Germany, the bloc’s biggest economy, posted a steeper decline, at 41.8, but the rate of decline eased in France, at 49.1, and in Italy, at 46.7.
London’s FTSE 100 wasdown after Fitch downgraded the UK’s credit rating outlook late on Wednesday to “negative” from “stable”, citing the government’s recently announced mini-budget.
“The large and unfunded fiscal package announced as part of the new government’s growth plan could lead to a significant increase in fiscal deficits over the medium term,” the ratings agency said.
In equity news, Imperial Brands shares gained after the tobacco company said current trading was in line with expectations and it was launching a £1bn share buyback.
Shares of Credit Suisse climbed after JP Morgan upgraded the Swiss Bank’s stock to ‘neutral’ from ‘underweight’.
On the downside, Shell lost ground as it warned third-quarter profits would be hit by a sharp decline in oil refining margins and weaker natural gas trading.
“Shell enjoyed record profits in the first and second quarter spurred by a surge in underlying oil and gas prices following Russia’s invasion of Ukraine. However, since June, oil has posted four consecutive months of declines, with Brent crude down by around 25% even after this week’s countertrend rally,” said Victoria Scholar, head of investment at Interactive Investor.
“In what is a notoriously cyclical business, Shell is grappling with a dysfunctional and volatile gas market as well as expectations of softening oil demand, particularly from China as the global economy cools.”
Reporting by Frank Prenesti at Sharecast.com
