European shares fall as miners tumble on weak China demand

By Shreyashi Sanyal

(Reuters) – European shares fell on Wednesday, with miners leading losses, as investors fretted over global demand outlook for metals following lacklustre trade data from China, while Ubisoft slid as a deal with Tencent dampened its buyout prospects.

Miners exposed to China lost 2.0% by 0828 GMT, while the European oil & gas index was down 1.8%.

Both sector indexes led declines in the benchmark STOXX 600 index, which dropped 0.5% after notching marginal gains in the previous session.

Data from China showed exports and imports had slowed in August with growth largely missing forecasts as sky-high inflation hindered overseas demand and new COVID-19 curbs and heatwaves disrupted output.

“The whole growth story has not been around U.S. or Europe, it has been China, so now investors have to downgrade their expectations for the future revenues coming from Chinese consumers,” said Sumit Kendurkar, senior trader at Optiver in Amsterdam.

Luxury stocks, that have a large exposure to Chinese demand, including Louis-Vuitton owner LVMH, Kering and Hermes were flat to 0.5% lower.

Shares in Ubisoft tumbled 13.9% to the bottom of the STOXX 600, after it announced a deal that will see China’s Tencent Holdings raise its stake in the company, a move seen as a signal that a full sale of the French game maker is now very unlikely.

Uniper SE slid 7.7% after its Finnish parent Fortum’s 2.35 billion euro bridge financing arrangement with government investment company Solidium stated it could not be used to prop up the German unit.

European markets started the month on a lacklustre note, widely affected by worries of an energy crisis amid soaring prices and the stoppage of Russia’s biggest natural gas pipeline to the region.

This has pushed many EU governments to push through multi-billion euro packages to prevent utilities buckling under a liquidity squeeze and to protect households from soaring energy bills.

“As politicians scramble to put sticking plasters on what looks set to be a longer term energy crisis, the outlook for the global economy has darkened again, sending fresh jitters through financial markets,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Also on the radar is a European Central Bank policy meeting on Thursday where it is widely expected to raise lending rates by 75 basis-points to curb record high inflation in the bloc.

Separately, data showed German industrial production slightly fell in July on supply bottlenecks due to ongoing pandemic-related distortions and the war in Ukraine.

(Reporting by Shreyashi Sanyal and Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips and Angus MacSwan)