Europe close: Stocks hammered after weak US ISM factory survey
European stocks were hammered on Tuesday, reversing early gains, as weak Eurozone manufacturing data offset gains by Apple suppliers and following the release of a considerably weaker than expected reading on US factory sector activity that traders said pointed to substantially slower hiring ahead in the States.
By the end of trading, the Stoxx 600 was 1.31% lower at 387.99, as the German Dax dropped by 1.32% to 12,263.83 and France's CAC 40 retreated by 1.41% to 5,597.00. Meanwhile, London's FTSE 100 was down by 0.65% at 7,360.32.
The IHS/Markit final Eurozone manufacturing purchasing managers’ index slipped to 45.7 from 47.0 in August, coming in just ahead of a 'flash' estimate of 45.6 but marking its lowest level since October 2012.
With ongoing concerns about Brexit and the impact of the US-China trade war, confidence about the future was little changed compared to August, when it hit its lowest level since November 2012.
It was a similar story Stateside, with the ISM institute's factory sector Purchasing Managers' Index unexpectedly slipping from a reading of 49.1 for August to 47.8 in September (consensus: 50.1).
For Ian Shepherdson at Pantheon Macroeconomics, the data were a testament to the impact that the US-China trade war was having.
"This means that if consumers’ confidence seriously falters, the U.S. could tip into the first recession ever caused directly by the actions of the President rather than the action of tight monetary policy on an overstretched private sector," he said.
For their part, analysts at Rabobank were telling clients: "At the heart of the slowdown is a downturn in global manufacturing that’s already visible in Asia, spilling over into Europe and eventually set to hit the United States.
"The trade war isn't the primary cause per se, but it certainly isn’t helping, nor is it going away. We forecast a US recession in 2020H2, with the timing based on a yield curve inversion model that’s been a strong indicator in the past. The global downturn is still a relatively modest affair in our spreadsheets and models, but the key risk is for a financial crisis to team up and blow it out of the water."
Meanwhile, a preliminary estimate from Eurostat showed that inflation unexpectedly declined, falling from 1.0% in August to just 0.9% in September, more than a full point below the European Central Bank's target of 2.0%.
Providing an early boost for technology issues - which later petered out - Apple chief executive Tim Cook told German tabloid Bild that the newly launched iPhone 11 has enjoyed a "very strong start".
Those remarks saw analysts at JPMorgan increase their iPhone sales forecasts by 1.0m for the current quarter and by 3.0m for the final three months of the year, with the news boosting the share price of Apple suppliers such as AMS.
Among individual stocks, Air France and British Airways owner International Airlines Group were both higher after Bank of America Merrill Lynch set 'buy' recommendations for both stocks.
Banks were also prominent among the top risers throughout much of the session, with Banco BPM, Bank of Ireland, Unione di Banche Italiane all racking up gains.
UK bakery chain Greggs was the top faller on the pan-European Stoxx 600 even as it said third-quarter total sales rose 12.4%, driven by higher customer numbers, and maintained its full-year outlook, adding that it still expected year-on-year sales growth would reflect strengthening comparatives seen in 2018.