FRANKFURT: European shares dipped on Tuesday, led by sharp declines in defence and energy shares, with investors parsing disappointing domestic and US jobs data.
The pan-European STOXX 600 fell 0.4 percent to 580.08, after marking its biggest one-day gain in close to three weeks on Monday.
Most major regional bourses were in the red with benchmark indexes in London and Germany shedding 0.6 percent each.
Germany’s private sector growth decelerated for the second consecutive month in December, S&P Global’s PMI data showed, while a flash estimate for France also showed a near halt in growth.
In the US, a labor department report showed jobs growth rebounded more than expected in November, but the unemployment rate was at 4.6 percent.
“With the US government shutdown, (investors) are now trying to get to grips with the kind of slew of data that’s coming out of the US and trying to decipher what’s noise and what’s important,” said Michael Field, European equity market strategist at Morningstar.
“Headlines as we’re seeing today of unemployment at four-year highs in the US certainly is enough to kind of scare investors.”
Defence stocks slid after the US offered to provide NATO-style security guarantees for Kyiv and European negotiators reported progress in talks on Monday to end Russia’s war in Ukraine.
Rheinmetall fell 4.6 percent, Hensoldt was off 3.7 percent, Leonardo shed 4 percent and the broader index was down 1.8 percent, its biggest one-day decline in more than two weeks.
“Defence has been the rising star of this year … however we could see that rally slow down into next year as most of the pricing of the new budget and the military spending have been already priced in,” said Swissquote’s senior market analyst Ipek Ozkardeskaya.
Meanwhile, financial services were a bright spot, up 1.2 percent. UBS was 3.8 percent higher after BofA Global Research upgraded its stock to “buy” from “neutral”.
London’s IG Group added 8.5 percent as it expects to deliver revenue growth around the mid-point of its guided range next year.
Technology stocks weighed on the index, with heavyweights ASML down 2.4 percent and SAP off 1.4 percent, as valuation concerns continued to persist.
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