European shares flat after weak China data, miners limit fall

BY Reuters | | 05/16/22 04:12 AM EDT

* China's April retail sales slip almost twice more than forecast

* Vodafone (VOD) rises as UAE telco take 9.8% stake

* Valneva plunges, says may have to reassess guidance

* Miners lead sectoral gains across Europe (Adds comments, updates prices throughout)

By Susan Mathew

May 16 (Reuters) - European shares closed flat on Monday as gains in miners limited earlier declines, while French and German stocks fell the most following alarmingly weak economic data from China which fanned global recession fears.

China's April retail sales plunged 11.1%, almost twice the fall forecast, while industrial output dropped 2.9% when analysts had looked for a slight increase, adding to fears that the world's second-biggest economy could contract this quarter amid COVID-19 lockdowns.

The pan-European STOXX 600 index closed flat, after posting its first weekly gain in five on Friday.

Germany's benchmark index fell 0.4% and French stocks dropped 0.2%, paring some early losses, while Wall Street also opened lower.

"The global economy will suffer from problems in supply chains and obviously China is crucial... and that's already in an environment where Europe sees a lot of inflation. So this (weakness in China) will impact the European economy," Teeuwe Mevissen, senior macro strategist at Rabobank, said.

"Rising prices will incentivize central banks to reconsider policies, with higher interest rates, and that is not helpful if you want to stimulate economic growth."

Monetary policy tightening and signals of more action, China lockdowns and the Russia-Ukraine war have dented sentiment this year, with the STOXX 600 down about 11% so far.

"It is certainly quite worrying that even the low valuations currently on offer in many stocks cannot tempt investors into buying - a sign of just how much the macroeconomic outlook worries everyone right now," Chris Beauchamp, chief market analyst at online trading platform IG, said.

European miners rose 1.5%, offsetting declines on the main index as prices of industrial metals rose.

Industrial stocks were the biggest drags on the STOXX 600, while luxury firms, which derive a chunk of their demand from China, fell with Louis Vuitton-owner LVMH down 1.1%.

Vodafone (VOD) rose 1.9%, after UAE-based telecoms company e& bought a 9.8% stake in the company.

Valneva tanked 19.1% after the French drugmaker said its COVID-19 vaccine agreement with the European Commission was likely to be scrapped and it might have to rethink its financial guidance.

French retailer Casino rose 4.8% as it launched a process to sell its renewable energy unit GreenYellow. A report said TotalEnergies and power company Engie are eyeing GreenYellow, valued at around 1.5 billion euros ($1.6 billion). (Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Rashmi Aich)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

fir_news_article