European shares pare losses following upbeat German data

March 25, 2019

By Medha Singh

(Reuters) – European shares fell on Monday on concerns over sluggish global growth but an unexpected rise in German business sentiment eased fears of a recession in the bloc’s largest economy.

The pan-European STOXX 600 index pared early losses to dip 0.12 percent while Frankfurt’s DAX, Milan’s, Madrid’s and Paris’s briefly turned positive after data showed German business morale improved unexpectedly in March, suggesting the country’s economy is likely to pick up in the coming months. London’s FTSE was marginally lower.

European stocks on Friday witnessed their biggest weekly decline this year following weak manufacturing data from Europe and the United States that inverted a part of the U.S. yield curve. In the past, that has signaled an upcoming recession.

“It’s the uncertainty around the outlook of the manufacturing sector which is causing the selloff which should be put into context of still a very healthy service sector,” said Mike Bell, global market strategist at JPMorgan Asset Management.

“There seem to be conflicting signals from the data with one survey telling things that things are deteriorating a bit in the manufacturing side but on the other hand the IFO survey is showing a pick up.”

Among the biggest weights on the pan-region index was Germany’s Bayer, down 2.1 percent. Its chief executive said over the weekend that management retained the backing of its supervisory board despite a second U.S. ruling that its glyphosate-based Roundup weed killer caused cancer.

While losses in health and technology sectors weighed on the index, a rise in auto stocks and banks limited losses.

Fiat Chrysler jumped 3.2 percent. The Wall Street Journal reported that the Italian carmaker had rebuffed merger approaches by Peugeot earlier this year.

British satellite operator Inmarsat jumped 8.6 percent to lead gains on STOXX after a private equity-led consortium agreed to buy the company for about $3.4 billion in cash.

Majestic Wine tanked 11.2 percent, on course for its worst day since November after it said it would review its dividend policy as it looks to focus on its online wine retail business Naked Wines.

Investors are also dealing with the uncertainty surrounding the United Kingdom’s exit from the European Union, with the risk of a potentially major “no-deal” shock to the European economy just over two weeks away.

Prime Minister Theresa May is under pressure to give a date for leaving office to swing Brexit-supporting rebel lawmakers in her party behind her twice-defeated European Union divorce treaty.

(Reporting by Medha Singh and Agamoni Ghosh in Bengaluru,; Editing by Keith Weir and Ed Osmond)

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