Share

Eurozone growth scare weighs on European shares

Paris - European stocks inched higher around midday on Thursday, adding to this week's tentative rebound, although weaker-than expected economic output data from Germany and France limited the gains.

By 13:00, the pan-European FTSEurofirst 300 index was 0.3% higher at 1 330.21 points, while the eurozone's blue-chip Euro STOXX 50 index was also up 0.3% at 3 066.83 points.

Indexes pared early losses and turned positive following comments from Russian President Vladimir Putin who said Russians don't need conflict with the outside world.

"We must calmly, with dignity and effectively build up our country, not fence it off from the outside world," Putin said during a visit to Crimea, which Russia annexed from Ukraine in March.

"We need to consolidate and mobilise but not for war or any kind of confrontation ... for hard work in the name of Russia."

European stocks have tumbled in the past few weeks, with the FTSEurofirst 300 down 5% since late June, knocked lower by fears of an escalation of the Ukrainian crisis and tensions between the West and Moscow.

Thursday's rebound was limited, however, by concerns over the pace of growth in the eurozone's two biggest economies.

Data showed Germany's economy suffered a surprise contraction - its first in more than a year - in the three months to June, and France slashed its growth forecasts for this year and the next after its economy failed to grow in the second quarter.

"The GDP figures are not reassuring, and it's adding to the fears over the weak inflation figures for the eurozone. The scenario of a steady economic recovery looks quite shaky now," Barclays France fund manager Thierry Claude said.

The weak GDP data also pushed lower German 10-year bond yields, which briefly traded below 1% for the first time ever, reflecting bets for fresh stimulus from the European Central Bank.

While the weak data clouded the macroeconomic picture in the eurozone, it was also seen boosting the chances of an ECB move to shore up the economy via an asset-purchase programme, which could drive up equity prices in the long run.

Some strong German corporate results also supported to the market on Thursday.

TUI AG rallied 5% after it said it is very confident its full-year results will reach the upper end of its target forecast after third quarter profits almost doubled.

Shares in steelmaker ThyssenKrupp added 1.7% as the German group said it may return to a net profit this year.

The recent correction in equities worldwide has boosted the asset class's risk premium to between 100 to 200 basis points above their long term average, Patrick Moonen, senior multi asset strategist at ING IM said.

"Taking risk in equities is well rewarded: we expect that over the next one or two years, these risk premiums will gradually normalise," Moonen wrote in a research note.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.97
-0.3%
Rand - Pound
23.97
-0.3%
Rand - Euro
20.48
-0.1%
Rand - Aus dollar
12.36
-0.1%
Rand - Yen
0.13
-0.4%
Platinum
907.94
+1.2%
Palladium
1,014.30
+1.3%
Gold
2,215.39
+0.9%
Silver
24.91
+1.1%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders