European Woes Continue, Stocks Fall
The European economy continued its anemic growth today as German inflation registered little movement from July to August.
Wednesday, October 15, 2014 - 00:00
The nation's economics ministry reduced its estimate for economic growth on the year from 1.8% to 1.2%, and from 2.0% to 1.3% for 2015. As Europe's largest economy, Germany's weakness does not bode well for the region as a whole.
Early data for September showed prices in the eurozone falling to their lowest mark since October 2009. An inflation estimate on October 16 will likely indicate a 0.3% annual rate.
European stocks fall
With the disappointing German data and an inflation rate that refuses to pick up, major indexes in Europe have suffered, Bloomberg reported. The Stoxx Europe 600 dropped 2.0% this morning and is down 7% so far in October. The Euro Stoxx 50 retreated 12% from its June peak. Germany's DAX and the France's CAC 40 were each down over 2% while the U.K.'s FTSE lost 1.6%, according to Bloomberg.
Shire Plc plunged 26%, leading a decline in health care shares, as US pharmaceutical company AbbVie Inc. planned to restructure their planned acquisition of Shire.
"Sentiment is extremely weak at the moment," Guy Foster, head of research at Brewin Dolphin Securities Ltd., told Bloomberg. "The negative sentiment seems to be driving an overreaction in stock-specific news, as with Shire. With the tax benefits eroded, it looks like AbbVie may be seeking a lower price for Shire. We're not going into the European earnings season with a great deal of excitement and optimism. Earnings data does seem to be mixed."
US indexes down
The US stock market also opened lower on Wednesday, with the Dow, Nasdaq and S&P 500 all notching 2% losses, according to Market Watch. Reports on New York state manufacturing along with US wholesale prices fell short of expectations while retail sales had their first decline in 8 months.
Despite the dip, some economists do not believe the stock market is entering a bearish phase."The equity market will bottom out once commodity prices find a floor and the fear of deflation recedes," Sean Darby, chief global equity strategist at Jefferies, told Market Watch.
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