By Pranav Kashyap and Lisa Pauline Mattackal
(Reuters) – European stock markets lost ground on Tuesday, weighed down by banking and energy stocks, as investors remained cautious ahead of key U.S. inflation data and an expected rate cut by the European Central Bank later in the week.
Shares of automaker BMW (ETR:) fell 11%, posting their worst day in more than four years after the company cut its 2024 profit margin outlook due to sluggish demand in its key Chinese market and problems related to a braking system supplied by Continental.
Continental shares fell 10.5%.
“With China becoming tougher and BMW overexposed to China, and with recovery expectations for the second half looking a bit optimistic, it remains difficult to see a positive catalyst for BMW,” Citi analysts wrote in a note.
Bank stocks also fell sharply, following a sell-off in U.S. lenders, with analysts citing downbeat comments from Goldman Sachs CEO David Solomon.
Deutsche Bank >DBKGn.DE> fell 4.91 percent and a European index tracking bank stocks lost 1.6 percent.
The oil and gas sector also fell 1.6% as prices fell below $70 a barrel for the first time since December 2021.
The pan-European index fell 0.5%, reversing gains made earlier in the day, with the auto sector down 3.8% and German stocks falling almost 1%.
Markets were on edge ahead of Wednesday's U.S. inflation report, which could provide clarity on the size of the Federal Reserve's rate cut when it meets next week.
The trajectory of interest rates and economic growth in the world's largest economy has largely set the tone for global markets in recent months.
In Europe, the ECB meets on Thursday and markets have fully priced in a 25 basis point rate cut, although the path of monetary policy for the rest of this year remains more uncertain.
“The question for markets is what happens next,” ING analysts said.
“(The ECB) by downplaying the possibility of an October cut and limiting itself to quarterly rate measures – at least for now – should act as a brake on the possible pace of easing.”
The rate-sensitive real estate sector was one of the few gainers on the STOXX 600 index, rising 1.7%.
On the economic front, data showed German inflation slowed to 2% in August.
<img src="https://technicalterrence.com/wp-content/uploads/2024/09/Banks-and-energy-stocks-weigh-on-European-shares-BMW-plunges.jpg" title="© Reuters. The chart of the German stock market index DAX is displayed at the Frankfurt Stock Exchange in Frankfurt, Germany, September 9, 2024. REUTERS/Staff/File Photo” alt=”© Reuters. The chart of the German stock market index DAX is displayed at the Frankfurt Stock Exchange in Frankfurt, Germany, September 9, 2024. REUTERS/Staff/File Photo” rel=”external-image”/>
Among the top-listed companies, Commerzbank (ETR:) closed down 2.4% as the German government began selling some of its shares, as previously announced. Chief Executive Manfred Knof also said he would not seek a new term after his contract ends in 2025.
Heavyweight AstraZeneca (NASDAQ:) fell 2.4% after detailed results from a study showed its experimental lung cancer drug did not significantly improve patients' overall survival outcomes.
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