European stocks hit a two-week low on Wednesday, as global markets were rattled by concerns of an imminent slowdown in the United States and weakness in the Chinese economy.
The pan-European STOXX 600 index fell 1%, with all major European markets down between 0.7% and 1%.
The STOXX volatility index rose to the highest since Aug. 9.
The losses tracked an overnight selloff in Wall Street’s main indexes, all of which recorded their biggest daily percentage declines since early August, with sentiment weakened by weak manufacturing data.
China’s manufacturing activity sank to a six-month low in August, weighing on luxury stocks in Europe such as LVMH Holdings, Richemont and Christian Dior.
“Fresh worries about the health of the global economy are gripping markets,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“We’ve got another snapshot from the services industry in China. They disappointed again with new order growth easing off and that’s added to the pessimism to some extent and also obviously the big tech wobble is causing concern.”
Despite the selling pressure, European equities were 7.5% higher for the year as prospects of lower borrowing costs in 2024 have kept the markets afloat.
On the day, semiconductor companies were the top losers, with ASML Holdings falling nearly 5% as UBS downgraded the stock and tracking a rout in Nvidia’s stock on Tuesday.
European shares fall as US data rekindles growth worries
In economic data, euro zone business activity received a boost from France hosting the Olympic Games last month but the malaise in the bloc is likely to return once the Paralympics wraps up as underlying demand remains weak.
Growth in Germany’s services sector slowed for a third consecutive month in August, a survey showed on Wednesday, in a further sign that Europe’s biggest economy is losing steam.
Germany’s benchmark DAX index was down 0.8%.
July producer prices data at 0900 GMT will shed more light on the region’s outlook for interest rates.
Among individual movers, Commerzbank slid 2.5% after the German government said on Tuesday it intends to reduce its stake in the lender.
Barratt fell 2.1% after the British housebuilder said housing demand continues to be sensitive to mortgage affordability after it posted a 56% slump in its annual profit.
Direct Line Insurance Group declined 1.5% after the British insurer missed expectations for its half-year operating profit as it struggles to reinvigorate its business, particularly its motor insurance arm.