European Stocks Drop Sharply; Growth Fears Overshadow Macron Poll Win

© Reuters.

By Peter Nurse 

Investing.com - European stock markets traded sharply lower Monday as investors fretted about the prospect of slowing global growth and sharp monetary policy tightening, overshadowing Emmanuel Macron’s victory in the French presidential election.

By 3:55 AM ET (0755 GMT), the DAX in Germany traded 1.3% lower, the CAC 40 in France fell 1.8% and the U.K.’s FTSE 100 dropped 1.9%.

With the vast majority of votes counted from Sunday’s French presidential election, Macron is seen comfortably beating the challenge of far-right rival Marine Le Pen. This provides markets with a degree of stability in the Eurozone's second-largest economy as well as reassurance about France's commitment to an integrated Europe.

That said, this result was largely expected, and investors remain concerned whether the global economy can withstand the increasingly hawkish pivot from a number of key central banks, in particular, the Federal Reserve, the slowdown of Chinese growth due to COVID lockdowns as well as the impact of the ongoing Russia-Ukraine war.

Fed Chair Jerome Powell said last week a half-point interest rate increase "will be on the table" when the central bank meets in early May, while the European Central Bank is also sending stronger tightening signals. 

Also weighing on sentiment are concerns about the outlook for growth in China, the world’s second largest economy, as it battles its most significant outbreak of COVID-19 since the original flare-up. 

Meanwhile, the war in Ukraine has entered its third month, adding to the general state of uncertainty, particularly in Europe. 

In corporate news, Vivendi SA (EPA:VIV) stock rose 0.1%, outperforming the wider market, after the French media giant reported first-quarter sales growth of 7.9%, helped by a strong performance at its pay-TV and advertising operations.

Roche (SIX:RO) stock fell 1.8% despite the Swiss drugmaker recording a better-than-expected 10% rise in first quarter sales and confirmed its 2022 outlook, helped by strong demand for rapid COVID-19 antigen tests.

Philips (AS:PHG) stock slumped 10% after the Dutch health technology company said first quarter core profit dropped about a third from a year earlier, hit in part by a recall of a large number of its ventilators.

The main economic release in Europe on Monday will be the Ifo’s latest business climate survey from Germany, which is expected to show a small deterioration in sentiment.

Oil prices slumped to near two-week lows Monday on increased concerns that the spreading COVID outbreak in China, the world’s largest importer of crude, will stunt demand.

By 3:55 AM ET, U.S. crude futures traded 4.1% lower at $97.92 a barrel, while the Brent contract fell 4% to $101.93. Both benchmarks dropped around 5% last week, and have now fallen to levels last seen on April 12.

Additionally, gold futures fell 0.9% to $1,916.20/oz, while EUR/USD traded 0.5% lower at 1.0739.