European stocks reflect weak data, recession fears

investmentnews.com:

European shares struggled for traction after the latest economic data highlighted Germany’s struggle to recover from an energy-induced downturn last winter and the mounting impact of higher borrowing costs.

A drop in household spending drove Germany’s contraction in the third quarter as Europe’s largest economy that’s beset by a budget crisis and probably in recession. Although a separate report showed business confidence improved for a third month in November, the measure fell below analysts’ expectations.

While some cyclical economic indicators in Europe appear to have bottomed, “that doesn’t mean they were good,” said Karsten Junius, chief economist at Bank J. Safra Sarafin Ltd. “They still point to a negative fourth quarter and hence recessionary territory in the second half of 2023.”

The Stoxx Europe 600 index fluctuated, on track for a modest weekly gain. BASF SE led an advance for the chemical sector after Bloomberg News repored that Abu Dhabi National Oil Co. is exploring an acquisition of its Wintershall Dea unit. US equity futures were steady.

Treasuries declined after trading resumed following a holiday, paring gains for the month. The 10-year yield rose more than seven basis points. European bonds extended declines following a report Thursday that Germany will suspend debt limits for a fourth consecutive year, adding to concerns over more borrowing. The Bloomberg dollar index steadied. 

Still, global stocks are on track for the best month in three years, with the MSCI All Country World Index up 8.6% this month amid growing hopes for peaking US interest rates.

“Lower bond yields are driving equity valuations, although the fundamental reason behind the drop in yields, lower inflation caused by weaker growth,