European shares post biggest one-day drop in over two weeks
The pan-European STOXX 600 index dropped 1.3% to 638.5 points
European shares suffered their steepest one-day drop in over two weeks on Thursday, weighed down by lacklustre earnings, hawkish central bank commentary and elevated crude oil prices.
The pan-European STOXX 600 index dropped 1.3% to 638.5 points. The index has struggled to break out of a narrow range this month as simmering tensions in the Middle East reinforce inflation fears.
While the European Central Bank kept interest rates unchanged on Thursday, markets perceived President Christine Lagarde’s comments as suggestive of a potential hike in September.
The ECB is clearly leaning hawkish. For all the data it will see and the analysis it will conduct between now and September, the decision will, to a large extent, come down to the trajectory of oil prices and conditions in the Middle East, said Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics.
Meanwhile, the food and beverage index declined 4.1%, weighed down by Nestle, whose shares dropped almost 8%, marking their biggest loss since 1989.
The company raised its full-year organic sales outlook but said it would sell part of its water and premium beverages business to Platinum Equity.
Tech stocks slid 2.9%, led by STMicroelectronics, which shed 17.7%. after the chipmaker forecast third-quarter revenue slightly below market expectations. BE Semiconductor declined 7.3% after its second-quarter results.
Offsetting some losses was a near-22% surge in Soitec after its quarterly revenue beat expectations.
Sentiment towards tech stocks has been mixed, as investors have punished hyperscalers for their rising AI spending, while beneficiaries of that spending are struggling with lofty valuations.
You’re seeing more questions being asked about where’s the future revenue going to come from. Twelve months ago, the rage was about hyperscalers and the same questions were asked. Now, the semis came into the fall, said Rushabh Amin, multi-asset portfolio manager at Allspring Global Investments.
He said: Even if you have decent earnings, there is a kind of drag coming from a slight unwind in sentiment and in positioning.