European stocks pushed higher on Monday following rockier trading in the Asia session and a US sell-off last week.
The region’s benchmark Stoxx Europe 600 was up 1.5 per cent in afternoon trading on Monday, while London’s FTSE 100 added 2 per cent.
That formed a sharp contrast to a technology-led US decline at the end of last week. The Nasdaq Composite closed 1.3 per cent lower on Friday at the end of its worst week since March, while the broader S&P 500 fell 0.8 per cent.
UBS Global Wealth Management said that the stumble in US markets “raises the question about whether the time has come to sell tech stocks”.
“But our view is that the move does not mark the start of a renewed decline in tech similar to March,” said chief investment officer Mark Haefele. “A correction need not signal the end of the rally.”
The rise in European stocks came despite signs that the region’s economic recovery is running out of steam. A 1.2 per cent rise in German industrial production in July undershot economists’ consensus expectations for a 4.8 per cent increase.
Investors are awaiting a European Central Bank monetary policy meeting on Thursday, which may offer clues on policymakers’ next steps to support the eurozone economy.
“We expect [ECB president] Christine Lagarde to deliver a very dovish message,” said Jonas Goltermann, senior economist at Capital Economics. “That will include publishing new, lower, inflation forecasts. But policy settings are likely to remain unchanged for now.”
Sterling fell sharply against the euro on Monday, shedding 0.8 per cent to €1.1130, as fears mounted that a trade agreement between the UK and the EU will be scuppered if Boris Johnson’s government goes through with plans to override the withdrawal agreement. The pound fell by a similar degree against the dollar to $1.3157.
The fall in sterling helped push the exporter-heavy FTSE 100 higher to become Monday’s best performing major European market.
The Russian rouble weakened to its lowest level against the euro since February 2016, briefly breaching the 90 mark, after Germany raised the prospect of sanctions in response to the poisoning of opposition leader Alexei Navalny. One euro recently bought Rbs89.8.
US markets are closed on Monday for the Labor Day holiday but futures for the benchmark S&P 500 were marginally lower and those tied to the Nasdaq 100 were down 1 per cent.
Strategists said that the strong performance for European equities was evidence that some investors were opting to shift towards stocks in economically sensitive sectors amid the risk of further falls for tech giants.
“The sell-off last week was very sector specific,” said Georgina Taylor, fund manager at Invesco. “It’s a sign of rotation [into non-tech stocks] but the question is how long the push lasts for.”
Chinese shares accelerated their losses near the close of trading. The mainland’s CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 2.1 per cent and Hong Kong’s Hang Seng index dropped 0.4 per cent.
SMIC’s Hong Kong-listed shares fell 23 per cent after Reuters reported that the Trump administration was considering adding the Chinese chipmaker to a trade blacklist. Fears that other companies could be next overshadowed upbeat economic data: Chinese exports rose by more than analysts’ expectations in August, pushing the trade surplus to its highest level this year.
Elsewhere in the Asia-Pacific region, Japan’s Topix fell 0.4 per cent while Australia’s S&P/ASX 200 added 0.3 per cent. Stocks in Tokyo were led lower by SoftBank, which slipped more than 7 per cent after it was revealed on Friday that the Japanese conglomerate had spent billions of dollars snapping up stock options on individual US tech shares.
Oil prices dropped to their lowest level in more than a month after Saudi Aramco said on Sunday that it would cut prices on crude shipments to Asia. Brent crude, the international benchmark, fell 1.7 per cent to $41.93 a barrel.