There is a marked reduction in European stocks largely caused by the general apprehensiveness in the global economy.
Stocks in the European market opened lower on Wednesday as general uncertainty continues to permeate the financial market and global economy. The Stoxx 600 fell 0.44%, as tech and mining stocks plunged by 1%. The market also saw a 0.41% fall in the CAC 40 Index and a 0.42% reduction in the FTSE 100. The DAX recorded the largest plunge, losing 0.53%.
European stocks seem to be responding unfavorably to the situation of the economy across the board. Stocks in China, along with markets in the Asia-Pacific region also fell with the Shenzhen Component dropping 0.91% to 11,029.3. The Shanghai Composite also fell, closing at 3,222.95 after losing 0.69%. Larger plunges were seen in the Hang Seng and Hang Seng Tech indexes, losing 1.6% and 1.5%, respectively.
Across other Asian markets, the Kospi in South Korea closed at 2,579 after losing 0.55%, while Japan’s Nikkei 225 and Topix indexes fell, with the Nikkei 225 losing 0.25.
Markets in the US also reflected the losses elsewhere. Although US markets were closed for Independence Day, stock futures fell. While the Nasdaq 100 futures lost 0.15%, the Dow Jones Industrial Average futures and the S&P 500 fell 0.13% and 0.09%, respectively.
On the other hand, the Nasdaq’s first half was its best Q1 in 40 years, since 1983, The S&P also had its best Q1 since 2019, following increased interest in artificial intelligence (AI) stocks. For some, the rise points to more increase in Q2.
European Stocks React to Global Economy
The uncertainty in economies across the world is causing ripple effects in European stocks and financial markets. For instance, Oil prices have fallen due to uncertainty with demand. Prices had initially soared following Russia and Saudi Arabia’s decision to cut output. At the time, Saudi’s decision was criticized by some who feared the move would weaken the oil market. Nonetheless, Saudi Aramco CEO Amin Nasser described oil market fundamentals for 2023 as “generally sound”. Despite the economic downturn in China and India, Nasser believes both countries would drive oil demand growth of over 2 million barrels per day.
Anxiety over the economy in China is also causing some unease for European stocks. According to customs data for May, exports from China fell 7.5% year-on-year (YoY), much higher than the 0.4% predicted by analysts Reuters polled. The same May data further revealed that Chinese exports to the EU dropped 4.9%.
Adding to the bleak forecast on China’s economy is a reduced growth outlook. Investment banking and management giant Goldman Sachs (NYSE: GS) reduced its growth outlook for China following troubles with recovering from the COVID-19 pandemic. Goldman Sachs expects China’s 2023 gross domestic product (GDP) to fall from 6% to 5.4%. Furthermore, Goldman Sachs predicts the GDP in 2024 will fall from 4.6% to 4.5%.
In recent times, European stocks have swung noticeably in response to several market events. For instance, these stocks opened higher in early June after the US Senate suspended the official debt ceiling. The Stoxx 600 had climbed only a few days after its lowest point in two months.