Europe stocks join global selloff after Asian ‘panic selling’

European stocks plummeted to their lowest levels in nearly six months, joining a global selloff this morning, as investors grappled with growing concerns about a potential US recession.

Fears that the US could be heading towards a recession have sent investors dashing away from risk assets. Japan’s Nikkei closed 13 per cent lower.

The pan-European STOXX 600 index tumbled by 2.2 per cent, dragged down by losses across all major sectors. In contrast, the Euro STOXX volatility index surged 5.7 points to 30.26, its highest since March 2023.

Germany’s DAX, France’s CAC 40, Britain’s FTSE, and Spain’s IBEX 35 all inched down by more than 2 per cent.

“You don’t get the Nikkei falling by its largest amount in nearly 40 years without some kind of repercussions across European markets,” Chris Beauchamp, chief market analyst at IG Group, told Reuters.

“These things don’t usually stop on a dime, it takes a few days to sort out… but the initial panic appears to be over.” Beauchamp added.

Fears of a US economic slowdown were ignited by last week’s disappointing jobs report and were exacerbated by a sharp decline in the Japanese Nikkei index. The heightened uncertainty prompted investors to flee from riskier assets, sending the Euro STOXX volatility index soaring.

Energy, financial, and tech stocks bore the brunt of the sell-off, with oil prices also falling amid recession worries. The banking sector was particularly hard hit as concerns about a potential economic downturn weighed on lenders.

While the eurozone economy has shown signs of resilience, with services activity continuing to expand, the broader economic outlook remains clouded by uncertainty. Investors are now eagerly awaiting the release of the US ISM non-manufacturing PMI later today for further clues about the health of the world’s largest economy.

Despite the overall market turmoil, some individual stocks managed to buck the trend. Galderma saw a significant jump after L’Oréal announced a stake purchase, while OCI Global surged following a major acquisition deal.

As central banks grapple with inflation and economic growth concerns, investors are bracing for a period of heightened volatility.

Attribution: Reuters