European shares end lower on poor inflation data but gain for August

European shares ended Monday lower, weighed down by weak financial stocks after disappointing German and Italian inflation data, but closed August higher thanks to optimism over new stimulus measures and a Covid-19 vaccine.

The pan-European Stoxx 600 index ended 0.6 per cent lower on the day, with the bulk of losses coming right before the close, in line with declines on Wall Street.

The index added about 2.9 per cent in August, but still remains about 15 per cent below pre-pandemic highs due to middling economic data and a resurgence in Covid-19 cases. It has stuck to a roughly 30-point trading range since June.

Travel and leisure stocks led gains for the month, adding nearly 15 per cent as countries relaxed some virus-driven curbs on travel. Still, the sector remains sensitive to any spikes in cases, and is among the worst performers this year. Financials were the biggest weights on the index for the day, after German and Italian inflation data missed expectations for August.

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EU inflation data is due on Tuesday and is widely expected to remain below the European Central Bank’s target.

“There had been speculation as to whether the current crisis would be deflationary or inflationary.

Monday's German inflation data suggests that for the time being the deflationary threat is clearly more pressing than any inflationary one," wrote Carsten Brzeski, chief economist, euro zone and Global Head of Macro at ING.

DUBLIN

The Iseq dropped 1 per cent to 6,434 on thin trading volumes. Shares in Swiss-Irish food company Aryzta climbed nearly 10 per cent to 59 cent amid speculation it may be planning to sell off its underperforming US business as part of a restructuring of the group. The baked goods specialist Aryzta has been struggling to halt a decline in earnings, particularly in the US, and negative investor sentiment towards its complex capital structure.

Similar to banks elsewhere in the euro zone, AIB and Bank of Ireland proved the biggest drag on the index, falling 2.5 per cent and 5.3 per cent respectively, on the back of poor Italian and German price data.

Paddy Power Betfair owner Flutter was up another 2 per cent to €140.30 amid a widespread pick-up in recreational and entertainment stocks. Ryanair was down 4.6 per cent at €12.08.

LONDON

UK markets were closed for a public holiday.

EUROPE

In Europe stocks turned lower following the open of US markets. Shares in Europe were initially higher as higher crude prices boosted oil and gas names while merger talks between major French utilities provided support for the sector.

MSCI’s world equity index, which has risen more than 6 per cent in August, is set for a fifth month of gains as massive monetary and fiscal stimulus outweighs concern about the outlook for a world economy battered by the coronavirus.

The pan- European Stoxx 600 index lost 0.6 per cent . The expectations for the Fed to keep interest rates lower for an extended period kept the dollar in check, with a fourth straight month of declines its longest streak since 2017.

Europe's utility sector featured among the top gainers on Monday, with shares in French water management company Suez jumping 18 per cent after Veolia Environnement offered €2.9 billion for a 29.9 per cent stake in the company.

NEW YORK

US stocks traded mixed, near all-time highs, as investors evaluated the outlook for global growth and central bank stimulus to counter the pandemic.

The Dow Jones Industrial Average led losses after its components were revamped, while the S&P 500 Index was little changed as it headed for a fifth straight monthly advance, the longest run in almost two years. Apple led Nasdaq gauges higher after its stock split four for one, while Microsoft and Walmart fell after China said it could block a possible sale of short-video app TikTok.

The Dow Industrial's constitution changed Monday after Apple's split, with the iPhone maker's weighting down to 2.9 per cent from 12 per cent. To maintain tech's relative sway in the blue-chip index, the overseers added Salesforce, ending Exxon Mobil's long run.

Amgen and Honeywell also joined, replacing Pfizer and Raytheon. Tesla's five-for-one split also took effect. With the S&P 500 up 7 per cent and 10-year treasury yields 20 basis points higher this month, investors have taken comfort in the global economy's reemergence from virus shutdowns. – Additional reporting Bloomberg/Reuters