European shares edge higher on defensive lift as weak China data stokes worries

European shares hovered near two-month highs on Monday as signs of a slowing Chinese economy prompted investors to turn to defensive sectors such as healthcare and consumer staples typically seen as immune to business cycles.

The pan-European STOXX 600 rose 0.3 per cent. The benchmark index was trading close to levels needed to recoup all of its June losses when fears about aggressive US interest rate hikes and recession dominated the sentiment.

Healthcare stocks were among the biggest boost to European bourses on Monday. AstraZeneca rose 2.3 per cent after the drugmaker said its cancer drug, Enhertu, developed with Japan’s Daiichi Sankyo, delayed the progression of a form of advanced breast cancer in previously treated patients.

Dublin

Home-builders Glenveagh and Cairn Homes fell 2.3 per cent and 0.5 per cent respectively as data on Ireland’s construction sector pointed to a significant downturn in activity linked to rising input costs.

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Having moved into contraction territory in June for the first time since April 2021, BNP Paribas Real Estate Ireland’s barometer of activity in the sector – fell to 41.8 in July from 46.4, which BNP Paribas said was the most marked month-to-month contraction in activity in a decade excluding periods of Covid-related disruption. Falling oil prices lifted Ryanair shares by 3 per cent to €3.16, driving Dublin’s Iseq index into positive territory for the session. It closed 1 per cent up at 7,282.

However, weak Chinese data stoked further fears of recession, triggering declines in financial stocks across Europe. AIB and Bank of Ireland fell 1.4 and 1.9 per cent respectively. Insulation maker Kingspan, meanwhile, rose 3 per cent to €64.52.

London

Britain’s blue-chip share index ended higher on Monday, as gains in drugmaker AstraZeneca and consumer stocks relieved pressure from losses in mining and oil heavyweights after data showed China’s economy unexpectedly slowed last month.

The FTSE 100 rose 0.1 per cent to hold near 10-week highs, while the midcap FTSE 250 index climbed 0.2 per cent.

The mood was sombre across global stock markets, with investors turning to defensive sectors such as healthcare and consumer staples amid worries about the health of the world’s second-largest economy.

“People are going to be worried a whole lot over the global economy,” said Capital Economics’ Oliver Allen.

“So if you’re looking at things through that kind of risk premia, that’s a bit worse for energy, materials, financials and some of the things that the FTSE 100 specialises in.”

The FTSE 100 has outperformed its global peers this year due to its large exposure to commodity stocks that have surged on the back of a jump in oil and metal prices.

A weakening pound has also boosted dollar earners in the index. The FTSE 100 is up nearly 2 per cent so far this year, while the MSCI world equities index has shed almost 13 per cent.

Oil major Shell and miners Rio Tinto and Anglo American slipped on Monday, in tandem with weaker commodity prices, after data from China data raised fears about weakening demand.

Europe

European stock markets have rallied off their June lows, echoing an upbeat sentiment on Wall Street, as signs that US inflation may have peaked encouraged investors to scale back bets of aggressive rate hikes by the Federal Reserve.

The Stoxx has climbed over 10 per cent since hitting a year low in June, but remains down 9.3 per cent for the year. Among other stocks, HelloFresh jumped 2.7 per cent after the German meal-kit maker said it could still achieve its earlier 2022 outlook despite cutting the forecast last month.

Henkel added 0.5 per cent as the consumer goods group raised its outlook for organic sales growth in fiscal 2022.

New York

US stocks erased losses in a choppy session with megacaps catching bids as investors digested weak data on New York manufacturing and the Chinese economy. Treasuries gained with the dollar, while commodities from oil to iron ore tumbled.

The S&P 500 traded little changed, while the tech-heavy Nasdaq 100 bounced higher with gains in stocks like Tesla and Apple.

Treasury yields declined and the bond curve remained deeply inverted, pointing to worries that the Federal Reserve’s campaign of monetary tightening against high inflation will spark a US recession. US stocks are coming off a fourth straight weekly gain, the longest run this year, with sentiment buoyed by signs of slowing price pressures that stirred hopes of a shift by the Fed to less aggressive rate hikes and a gradual slowdown in the economy.

Still, the rally has left market breadth looking stretched with stocks vulnerable to a pullback as fears over a downturn resurface.

– Additional reporting by PA/Reuters