On Friday, European stocks closed lower, as they declined by more than 1% in the week because investors were weighing the risks from the tighter monetary policies after the European Central Bank (ECB) indicated that they would slow down the pandemic-fueled bond purchases. There was a 0.3% decline in the pan-European STOXX 600 index and it fell for four of the total five sessions in the week, due to worries about a slowdown seen in the global economic recovery. Still, the biggest weekly declines were experienced by the defensive sectors, such as real estate and health. This was because investors were positioning for a potential pickup in the global economic recovery.
The Asian stocks that had been significantly battered finally got some relief after news surfaced regarding a call between US President Joe Biden and Chinese leader Xi Jinping. This particularly benefited tech companies that have come under a great deal of regulatory scrutiny in Beijing. There was a 0.7% gain in the tech stocks in Europe, whereas luxury stocks also saw a boost after a 0.8% increase in France’s LVMH after HSBC gave a recommendation of buying back the stock. However, the biggest gainers of the day were China-exposed miners, as they climbed up by 1.1%.
European stocks did get support after the European Central Bank stressed that it wasn’t going to completely close the money taps, even though projecting higher inflation and growth for the eurozone. Market analysts said that the outcome of the meeting was mostly going to be supportive in the short run. However, they did say that even if Christine Lagarde, the President of the ECB, was cautious in highlighting that this was just a recalibration, it didn’t mean that there wouldn’t be any tapering off. It just means that a ‘real’ tapering would probably come next year, as long as the economic conditions remain stable enough.
Thanks to recovery prospects and strong earnings, European stocks have managed to stay below their mid-August record highs. But, a number of money houses are skeptical of any additional gains, especially in the US stock markets, which is home to a number of high-growth companies. Data indicated that the economy in Britain had unexpectedly slowed down to a crawl in the month of July because the Delta variant of the coronavirus had spread rapidly. Amongst the other stocks, there was a 4.8% decline in Frensenius Medical Care, after the stock was downgraded by JPMorgan to ‘underweight’.
There was also a 0.8% decline in Rubis, the French energy storage group, and it was the STOXX 600’s biggest decliner after it highlighted difficulties in its Caribbean business. There was a 2.5% increase in BioNTech after two executives of the German biotech company revealed that they were ready to request the approval of their COVID-19 vaccine around the globe for use in children as young as five. The vaccine has been developed in collaboration with US company Pfizer Inc. and has been used in different parts of the world.
