European shares slip as economic growth data fuels rate hike concerns (updated)

SalMar ASA

24/01/2023 10:11

(For a Reuters live blog on U.S., UK and European stock
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        * 
      STOXX 600 off 0.2%
    

        * 
      EZ Jan business activity returns to growth -PMI
    

        * 
      Swatch Group up, says positive on China recovery
    

        * 
      Norwegian salmon farmers jump on tax cut hope  
    

  
 (Updates prices, adds comment)
    By Sruthi Shankar and Amruta Khandekar
       Jan 24 (Reuters) - European stocks fell on Tuesday as an
improvement in economic activity in the euro zone spurred
speculation the European Central Bank (ECB) might have more room
to raise interest rates to tackle inflation.
    The pan-European STOXX 600 index  .STOXX  was down 0.2% at
the close, but was off its session lows. 
    Data showed euro zone business activity made a surprise
return to modest growth in January, adding to signs the downturn
in the bloc may not be as deep as feared and that the currency
union may escape recession.
        Hopes of a milder recession in the euro zone and smaller
interest rate increases from the Federal Reserve have buoyed
European equities this year. The STOXX 600 has risen 6.7% so far
in 2023, outperforming a 4.5% annual rise in the U.S. benchmark
S&P 500 index  .SPX .
  
        Euro zone government 
    bond yields fell
     after the business activity data as investors tried to
assess the ECB's future monetary tightening path.
  
    "The constant battle (is) growth versus rate hikes. If
things are going well economically, which is good for stock
markets, that also gives the ECB room to raise rates," said
Steve Sosnick, chief strategist at Interactive Brokers.
        Sosnick also pointed to profit-taking playing a role in
the day's declines.
  
        Although the ECB has been raising rates at its fastest
pace on record, it has so far failed to bring inflation anywhere
near its 2% target.
  
    Hawkish comments from ECB policymakers have helped cement
bets of 50 basis point interest rate rises at each of its next
two meetings, with one scheduled next week.
    The U.S economy also showed signs of improvement, with the
downturn in the country's business activity easing slightly in
January even as it contracted for the seventh straight month.
    Among STOXX 600 sectors, healthcare  .SXDP  and energy
stocks  .SXEP  led declines, falling over 1% each.
    Gains in financials limited losses as banks  .SX7P  rose
0.6% while economically linked industrial stocks also climbed
0.9%.
    On Tuesday, Logitech International  LOGN.S  gained 3.4%
after the computer peripherals maker said it expects the
downturn in spending by business customers which hit its third
quarter sales to be temporary.
    Swatch Group  UHR.S  rose 5.1% after the world's biggest
watchmaker said it expected a recovery in luxury demand from
China.
    Shares of Norwegian salmon farmers SalMar  SALM.OL  and 
Mowi  MOWI.OL  jumped 5.3% and 2.2%, respectively.
    Traders pointed to a media report suggesting adjustments to
the centre-left government's salmon tax hike proposal, which has
weighed on the sector. 
 (Reporting by Sruthi Shankar and Amruta Khandekar in Bengaluru;
Editing by Savio D'Souza, Shinjini Ganguli and Andrea Ricci)
 ((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223
8780; outside U.S. +91 80 6182 2787;))