Europe’s main stock markets stumbled on Friday on disappointing economic data heading into the weekend, while London marked a year since Brexit with another pale session.
European stock markets are “on the back foot, with a host of eurozone PMI [purchasing managers’ index] surveys ... providing a somewhat cautious assessment,” IG Group PLC analyst Joshua Mahony said.
Shares in London saw a fourth straight day of losses a year to the day after Britain shocked its neighbors by voting to leave the EU, with the FTSE 100 on Friday losing 0.2 percent to close at 7,424.13, a decline of 0.53 percent from 7,463.54 on June 16.
“Stock markets have fallen yet again as the disinflation fear is still doing the rounds,” CMC Markets analyst David Madden said, adding that traders were concerned oil’s price weakness would put “downward pressure” on inflation, damping down growth expectations.
On Brexit, Madden said that since this time last year, “it has certainly been a rocky ride to say the least.”
Eurozone private sector business activity slowed sharply this month, but over the second quarter recorded its fastest expansion in six years, a closely watched survey showed on Friday.
Analysts said that while the downturn in the headline readings was disappointing, the economy continued to put in a strong performance.
Data monitoring company IHS Markit Ltd said its composite PMI came was 55.7 points, the lowest reading in five months and down from 56.8 last month.
Any reading above the boom-bust 50-point line indicates the economy is expanding.
“After a string of exceptionally strong figures, the composite PMI for the eurozone has come down to earth in June,” UniCredit SpA economist Edoardo Campanella said.
“While the decline in the composite PMI was driven by a slowdown in the services industry, which is often subject to substantial monthly volatility, the manufacturing sector remains in good shape,” he added.
PMI measures companies’ willingness to invest in their business, providing a good idea of how well the underlying economy is performing.
The benchmark STOXX 600 on Friday dropped for a third week, closing at 387.62, with food and beverage companies among the biggest losers after Stifel Financial Corp downgraded brewer Heineken NV’s stock. The index closed at 388.60 on June 16.
In Europe, the battle lines over negotiations to untangle Britain from the EU have been drawn, with residency rights and clearing of euro-denominated financial instruments among the first issues making headlines.
“As a heatwave engulfs Europe, equities may suffer from sticky conditions near-term,” Bank of America Merrill Lynch strategists, including Ronan Carr, said in a client note on Friday. “Slowing cyclical momentum, weak oil and policy uncertainty could cause a wobble.”
Additional reporting by Bloomberg
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