European Stocks Dip as Auto and Delivery Shares Curb Optimism
European stocks edged lower on Friday, paring some of Thursday's gains while still hovering near record highs as autos weighed on the wider benchmark.
The Stoxx Europe 600 Index dipped 0.3% as of 8:10 a.m. in London after coming into striking distance of yet another record high on Thursday after a central bank-heavy week. Most sectors fell, led by autos and technology, while utilities gained.
Among individual stocks, Mercedes-Benz Group AG dropped after the company cut its financial forecast for the year. The luxury-car maker cited a rapid deterioration of its business in China, marking the latest blow to Germany's struggling industrial sector. European delivery companies including Deutsche Post and IDS were also under pressure after US operator FedEx Corp. warned its business would slow in the year ahead.
The Federal Reserve's rate cut this week sent European stocks back near their record highs and strategists surveyed by Bloomberg expect the rebound to continue. Still, worries linger and strategists believe volatile conditions could remain in place in the short term.
"We are currently transitioning into the historically volatile part of the month of September, known for its market turbulence," said Florian Ielpo, head of macro research at Lombard Odier Investment Managers.
The economy remains the wild card, with manufacturing data in Europe continuing to show contraction. That raises question of whether defensives stocks' outperformance over the past few months is running out of steam.
Despite markets' recent positive performance, sentiment indicators such as the VIX or CDS spreads have yet to signal a clear green. "We are not there yet," said Ielpo. "This suggests that investor confidence might not have fully rebounded, and a degree of wariness remains advisable."
Source : Bloomberg
