Europe midday: Stocks hold lower
By Alexander Bueso
Date: Friday 23 Jun 2023
(Sharecast News) - Stocks on the Continent were lower following the release of much weaker than expected readings for euro area factory and services activity.
"European stock markets headed lower again Friday to cap a pretty downbeat week, with the major indices sliding about 2% over the five days," said Neil Wilson, chief market analyst at Finalto.
"Investors seem to be pausing for breath - lots of risks ahead after the liquidity-injection rally [...] liquidity trap coming? It looks decidedly risk-off this morning with the dollar firmly bid and crude oil sharply lower for a second day - the mood is changing from inflation risk to growth risk."
The Stoxx 600 was off by 0.43% to 452.76 with all of the main regional gauges in the red. Germany's Dax was off by 1.29% at 15,782.59, while France's Cac-40 was down by 0.65% to 7,156.46.
Euro/dollar was holding lower, retreating by 0.62% to 1.0888 amid talk from some economists that similar weak prints going forward might lead the European Central Bank to pause instead of hike rates come September.
In parallel, the yield on the benchmark 2-year German bond yield was dropping 13 basis points to 3.093%.
Front-dated Brent crude oil futures were off by 1.16% to $72.98 a barrel on the ICE.
"Inflation, and in particular, the ECB's inflation forecasts come September, remain the key input variable for the decision of whether to deliver a final hike at that meeting," said Claus Vistesen, Pantheon Macroeconomics's chief Eurozone economist.
"But if the PMIs and hard data are falling off a cliff by September, it will be a strong argument in favour of a hold."
Earlier, S&P Global had reported that its flash PMI for euro area services retreated from 55.1 in May to 52.4 (consensus: 54.9) for June - a 5-month low - while that for manufacturing dropped from 46.4 to 44.6 - an 8-month low (consensus: 46.8).
For both the factory and services PMIs, the 50 point level was the threshold that distinguishes between a contraction or expansion in the sector.
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