European stock markets faced a challenging day on Monday, primarily driven by a significant downturn in the technology sector, which saw investors adopting a cautious stance in anticipation of crucial US inflation data due later in the week. This forthcoming report is highly anticipated as it could influence future interest rate decisions.
The pan-European Stoxx 600 index closed the day down by 0.4%, retreating from the all-time high it achieved in the previous session. The downturn was notably led by the technology sector, which fell by 2%, significantly impacted by an 8.9% drop in shares of BE Semiconductor. The decline in this chipmaking parts supplier, attributed to concerns over potential delays in the adoption of hybrid bonding, positioned it at the lowest point on the Stoxx 600 for the day. Moreover, heavyweight chipmaker ASML also saw a reduction in its share value, decreasing by 4.2%.
Investor focus is now transitioning towards the upcoming US inflation report for February, scheduled for Tuesday. This report is keenly waited for insights into the possible timing of interest rate reductions, especially after a recent report indicated an acceleration in job growth within the US last month. Ben Laidler, a global markets strategist at eToro, highlighted that the strong US job figures from Friday are leading to anticipations of a high inflation reading, which, in turn, has contributed to a cautious approach towards European assets.
Further influencing the market, Germany’s 10-year bond yield, a benchmark within the eurozone, experienced a slight increase on Monday, recovering from its most significant weekly decline since December of the previous week. Additionally, Europe’s industrials sector and the mining index were also among the day’s top losers, with the latter dipping by 0.4%.
Laidler also noted that ahead of the US inflation data, there’s been a natural inclination towards profit-taking, especially in resources, which are particularly sensitive to fluctuations in the dollar and bond yields.
Investors are also awaiting the release of the eurozone’s January industrial production figures later in the week, with hopes that softer economic indicators might encourage both the US Federal Reserve and the European Central Bank to commence a cycle of monetary policy easing from June onwards.
In other corporate news, LEG Immobilien saw its shares climb by 5.1% after announcing a full-year results beat and proposing a dividend that exceeded expectations. Conversely, Telecom Italia experienced a 4.6% decline in its shares following the publication of details related to the cash flow and debt levels of a new venture, which did not meet investor expectations. Similarly, shares in Italian regional utility A2A fell by 3.6% after it signed an agreement to acquire some electricity distribution networks from Enel for US$1.3 billion.
