European stocks fall from record highs as uncertainty creeps in

[March 11, 2024]  By Elizabeth Howcroft

LONDON (Reuters) -European stock indexes were mostly in the red in early trading on Monday, falling from last week's record highs as traders grappled with uncertainty over the economic outlook and waited for U.S. inflation data later in the week.

U.S. stocks edged down from recent highs on Friday, in a move analysts attributed to profit-taking, after U.S. payrolls data presented a mixed picture but maintained expectations for a Federal Reserve rate cut in June.

Traders are now focused on U.S. inflation data due on Tuesday, which could change expectations for when major central banks will begin cutting rates.

At 0948 GMT, the MSCI World Equity index was down 0.2% on the day, having hit a new all-time high on Friday.

The pan-European STOXX 600, which also hit an all-time high on Friday, was down 0.5%. London's FTSE 100 was down 0.3% and Germany's DAX was down 0.7%.

Amelie Derambure, senior multi-asset portfolio manager at Amundi, said that Monday's downturn could be due to uncertainty about the economic outlook, and high valuations in stocks.

"There are some elements on the macro outlook that are maybe not as clear as one was willing to believe," she said.

Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers raised expectations that interest rate cuts will begin in summer, helping push stock indexes to new highs.

Derambure said there is "fatigue" in stocks, pointing to a split in the trajectories of the so-called "Magnificent Seven" group of U.S. technology stocks, which have rallied strongly in recent years. A slump in Tesla this year has seen it diverge from the group.

"To us, there are some excesses in the markets so we want to be a bit more cautious on that front," she said.

"We believe it's all priced for perfection and the reality might be slightly different."

Tuesday's U.S. consumer price index (CPI) report for February is forecast to rise 0.4% for the month and keep the annual pace steady at 3.1%. Core inflation is seen rising 0.3%, which will nudge the annual pace down to the lowest since early 2021 at 3.7%.

Stacked containers are seen at an industrial port in Tokyo, Japan February 15, 2024. REUTERS/Issei Kato

U.S. Treasury yields have declined in recent weeks, as hopes for a rate cut put downward pressure on yields. The U.S. 10-year yield was down 3 basis points at 4.0672%.

Euro zone government bond yields were mostly lower, with German 10-year yield steady at 2.258% after last week seeing its biggest weekly fall since December.

The U.S. dollar index was flat at 102.68, having dropped more than 1% last week, and the euro was steady at $1.09375.

The yen edged higher as Reuters reported that a growing number of Bank of Japan policymakers are warming to the idea of ending negative rates this month.

The dollar was down 0.4% against the yen, with the pair at 146.52.

Data released on Monday showed Japan was not in recession after economic growth was revised up to an annualised 0.4% for the December quarter.

Chinese stocks gained after data over the weekend showed a bounce in inflation. China also said it will improve home sales in a "forceful" and "orderly" way, as the country's beleaguered residential property market remains troubled by weak demand.

Oil prices recovered, having fallen last week due to concerns about slow demand in China. Brent futures were up 0.4% at $82.42 a barrel, while U.S. West Texas Intermediate (WTI) was up 0.35% at $78.28 a barrel.

The decline in the dollar and bond yields has been supportive of non-yielding gold which was up at $2,180.63 an ounce, having surged 4.5% last week to record peaks. GOL/

Cryptocurrency bitcoin hit a new all-time high at $71,836.

(Reporting by Elizabeth HowcroftEditing by Ros Russell)

[© 2024 Thomson Reuters. All rights reserved.]
This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.