European shares fell on Monday after weaker-than-expected growth data from China hit luxury stocks, while a relentless surge in commodity prices fuelled worries about inflation spiralling out of control.
The pan-European STOXX 600 index (.STOXX) fell 0.5% after an upbeat start to the quarterly earnings season drove its strongest weekly performance since March on Friday.
Asian stocks came under pressure after data showed China’s economy hit its slowest pace of growth in a year in the third quarter, hurt by power shortages, supply chain bottlenecks and major wobbles in the property market.
China-exposed luxury stocks including LVMH (LVMH.PA), Kering (PRTP.PA) and Hermes (HRMS.PA) fell about 3% each, also hurt by Chinese President Xi Jinping’s call for the expansion of a consumption tax.
“(Sentiment) is being driven by some of the data out of China,” said Michael Bell, global market strategist at JP Morgan Asset Management. “It’s ongoing concerns around the slowdown in the real estate market really.”
Belgian materials technology and recycling group Umicore (UMI.BR) was among major laggards, falling 5.5% after it cut its profit outlook to reflect a stronger than previously expected impact from the global semiconductor shortage.
Analysts are expecting European companies to report a near 47% jump in third-quarter profit, as per Refinitiv IBES data. Those figures have been revised higher in recent days, helping the STOXX 600 inch toward its August peak.
“When we look at the outlook in the next 12 months, valuations may come down a little bit, but not enough to offset the move higher that we see in earnings, and that should be pretty positive,” JPMorgan’s Bell said.
European miners (.SXPP) as well as oil and gas (.SXEP) stocks were among the few gainers as crude futures rose past $85 a barrel and metal prices rallied.
The Hut Group (THG.L) rose 5.5% after the British online retailer backed by SoftBank said it would remove its founder’s “golden share” and seek a premium listing after its shares plummeted last week.
French biotech company Valneva (VLS.PA) shot up 32.3% after it reported positive results from a late-stage trial for its inactivated, adjuvanted COVID-19 vaccine candidate.