Technology stocks lead European shares lower

PARIS: Europe’s main share indices fell to a two-week low on Wednesday, with technology stocks leading declines as concerns of an imminent slowdown in the United States and weakness in the Chinese economy rattled global markets.

The pan-European STOXX 600 index fell 1%, with all major regional markets down between 0.5% and 1%. The STOXX volatility index rose to the highest since Aug. 9.

Europe’s technology stocks led declines with the sector falling over 3% to a near one-month low, tracking a selloff in Wall Street technology stocks after a string of softer than expected economic data dampened sentiment Additionally, China’s manufacturing activity sank to a six-month low in August, weighing on luxury stocks in Europe such as LVMH Holdings, Richemont and Christian Dior which dropped between 3% and 5.8%.

Worries about slowing growth in the United States and China, the world’s two largest economies, have pressured European markets over the past month as the region’s economies grapple with their own economic woes.

Euro zone business activity was a mixed bag, with France’s services sector receiving a boost in August from hosting the Olympic Games, while growth in Germany’s services sector slowed for a third consecutive month in a further sign that Europe’s biggest economy is losing steam.

HCOB’s composite Purchasing Managers’ Index for the region came in at 51.0, a touch below a preliminary estimate of 51.2. Producer prices slipped 2.1% in July on a yearly basis, less than the 2.5% forecast in a Reuters poll.

“A mixed set of Eurozone Services PMIs did little to offset the pervading gloom,” said David Morrison, senior market analyst at Trade Nation.

“Investors appear wary of buying the dip ahead of this week’s US employment data.” US non-farm payrolls data on Friday will be closely watched for further clues on the state of the economy and outlook for the Federal Reserve’s monetary policy.

Despite the selling pressure, European equities remain 8.5% higher for the year as prospects of lower borrowing costs have kept markets afloat. The European Central Bank is widely expected to cut rates later this month.