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European stocks slide amid geopolitical, rate uncertainties

written by Bella Palmer
stocks-mixed

The pan-European STOXX 600 index closed 0.2% lower, paring early losses that saw the index hit a two-week low

European stocks slid on Tuesday, as investors navigated geopolitical and global interest-rate cut uncertainties, while German company SAP's strong outlook bolstered tech stocks and helped cushion some losses.

The pan-European STOXX 600 index closed 0.2% lower, paring early losses that saw the index hit a two-week low.

A spike in yields on benchmark German bunds also pressured equities, with utilities leading sectoral declines.

The STOXX has reached record highs multiple times this year, but has pulled back further from the milestone as investors priced in stagnating economic growth and weak Chinese demand.

The International Monetary Fund (IMF) forecast manufacturing powerhouse Germany will see zero growth this year and will weigh on wider euro zone performance.

Key upcoming triggers include the ongoing geopolitical tensions and doubts over the pace of interest rate cuts which have boosted the safe-haven U.S. dollar and gold.

Traders see the ECB reducing borrowing costs by around 130 bps by the end of this year as European Central Bank President Christine Lagarde said inflation in the currency union may drop back to 2% quicker than previously thought.

Amid the gloom, SAP's shares gained 2.1%, lifting the wider tech sector by 0.9%, after the software company increased its full-year targets on strong cloud business in the third quarter.

The stock cushioned some of the German DAX's losses, given its 15% weight age on the index.

Although the tone was resolutely bullish about the mid to long term growth opportunity, including from AI, a degree of prudence into year-end makes sense in an uncertain macro backdrop, analysts at BofA global research said in a note.

Switzerland's main index slipped 0.8%, with Logitech at the bottom with a 6.5% decline. The stock had initially soared 3% after increasing its full-year forecast.

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