European shares slide as weak China data stokes recession woes

By Susan Mathew

(Reuters) -European shares fell on Monday, with French and German stocks losing up to 1% each, as alarmingly weak economic data from China fanned global recession fears.

China’s April retail sales plunged 11.1%, almost twice the fall forecast, while industrial output dropped 2.9% when analysts had looked for a slight increase, adding to fears that the world’s second-biggest economy could contract this quarter amid COVID-19 lockdowns.

The pan-European STOXX 600 index fell 0.4% by 0801 GMT, after posting its first weekly gain in five on Friday.

German and French benchmark indexes were last down about 0.6% each, paring some early losses, while Wall Street futures pointed to a lower open. [.N][MKTS/GLOB]

“The global economy will suffer from problems in supply chains and obviously China is crucial… and that’s already in an environment where Europe sees a lot of inflation. So this (weakness in China) will impact the European economy,” said Teeuwe Mevissen, senior macro strategist at Rabobank.

“Rising prices will incentivize central banks to reconsider policies, with higher interest rates, and that is not helpful if you want to stimulate economic growth.”

Monetary policy tightening and signals of more action, China lockdowns and a raging Russia-Ukraine war have dented sentiment this year, with the STOXX 600 down about 11% so far.

The travel and leisure sector led losses on Monday, down 1.2%, with Ryanair slipping 3.3% after it said ticket fare levels were lower than the company had anticipated earlier in the year.

Industrial stocks were the biggest drags on the STOXX 600, while luxury firms, which derive a chunk of their demand from China, fell with Louis Vuitton-owner LVMH down 1.3%.

The telecom sector <.SXKP, on the other hand, was up 0.7%, buoyed by a 3.3% jump in Vodafone, after Emirates Telecommunications Group bought a 9.8% stake in the company.

France-listed Valneva tanked 17.0% after warning that the vaccine maker might have to reassess its financial guidance after the European Commission informed that it plans to terminate an advance purchase agreement for its COVID-19 vaccine candidate.

French retailer Casino rose 2.4% as it launched a process to sell its renewable energy unit GreenYellow. A report said TotalEnergies and power company Engie are eyeing GreenYellow, valued at around 1.5 billion euros ($1.6 billion).

(Reporting by Susan Mathew in Bengaluru; Editing by Rashmi Aich)