PARIS: Europe’s benchmark stock index capped off the first trading day of the New Year lower with technology stocks amongst top decliners on Tuesday, as traders bid adieu to an upbeat 2023 that was fuelled by expectations of nearing interest rate cuts.
The pan-European STOXX 600 index ended 0.2% lower after hitting its highest level since Jan. 2022 intraday, with euro zone government bond yields also rising.
The technology sector index led declines, falling 1.8%, dragged by a 2.6% fall in shares of computer chip equipment maker ASML after the Dutch government partially revoked an export licence for the shipment of some of its machines to China.
Retail and real estate also lost 1.2% and 1.1%, respectively.
Expectations of softer monetary policy drove a 12.7% jump in the STOXX 600 in 2023, almost fully rebounding from a 12.9% slump in the previous year after major central banks unleashed rapid rate hikes to curb spiralling inflation.
Italian shares were the top 2023 performers, while Germany’s benchmark DAX and France’s CAC 40 also hit record highs in the previous year.
“There are these expectations that it’s a new year, a new setup, but fundamentally nothing really has changed... Focus remains on economic data and what’s going to happen with central banks and monetary policy,” said Daniela Hathorn, senior market analyst at Capital.com.
Signs of economic woes were underscored by a survey showing euro zone factories ended 2023 on the back foot, with activity contracting in December for the 18th straight month.
Among major economies, German manufacturing activity continued to contract although expectations for future business turned positive for the first time since April.
Wall Street also had a sombre start to the year as stocks fell while government bond yields rose.
On the brighter side, shares of shipping companies Maersk , Hapag-Lloyd and Frontline climbed between 6.4% and 3.3% as continued attacks on vessels in the Red Sea lifted investors’ expectations for higher freight rates.
Separately, Denmark’s Maersk said it would continue to pause all cargo shipments through the Red Sea.
The euro zone banks index rose 1.6%, hitting its highest level since May 2018 as Italy’s Monte dei Paschi advanced 6.1% after Economy Minister Giancarlo Giorgetti said in a newspaper interview that the Italian Treasury’s sale of its stake in the bank is proceeding successfully.
Trading activity resumed after a long weekend for the New Year’s Day holiday though Swiss markets were closed on account of the Berchtholdstag holiday.