European shares rebound, but set to end volatile September with losses

(Reuters) – European stocks continued their rebound on Thursday from a bruising sell-off earlier this week, but were set for monthly declines on worries about a slowing global economy and higher inflation.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 29, 2021. REUTERS/Staff

The pan-regional STOXX 600 index rose 0.6%, led by technology stocks, which were at the centre of the market rout, while miners rose from sharp declines fuelled by worries about China’s economy.

Defensive sectors such as real estate, healthcare and food & beverages also rose.

The European stocks benchmark is on track to end September with losses of 2.8% after a seven-month winning streak, as a surge in government bond yields drove investors out of high-growth sectors such as technology into economically sensitive banking and energy stocks.

“Recent market moves suggest that a rotation is under way in favour of sectors and assets that benefit from a consumption shift from goods towards services,” BCA analysts said in a note.

“Given that we do not expect rising interest rates to have a damaging impact on the real economy over the coming 12-18 months, we recommend that investors maintain a moderate overweight allocation to stocks.”

A growing number of risks including hawkish stance from the U.S. Federal Reserve, supply-chain constraints and Chinese property developer Evergrande’s financial troubles have weighed on sentiment this month, even as investors bet on a steady European economy.

Defensives-heavy Swiss market is among the biggest decliners this month, while banking-heavy Spanish and British indexes remained buoyant.

Among individual stocks, Sweden’s H&M was flat after the retailer said supply disruptions hit sales in September, while spirits maker Diageo Plc gained 2.5% after it forecast a boost to operating margins as people opt for premium brands.

Swedish cloud communication services provider Sinch rose 4.4% after saying it had agreed to buy cloud-based email delivery platform Pathwire in a deal worth about $1.9 billion.

British online fashion retailer Boohoo tumbled 10.7% as it warned that freight inflation and higher wages for its distribution centre workers would impact full-year profit margins.

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