EUROPEAN shares suffered their worst monthly performance in four years yesterday, as concerns over a Chinese economic slowdown and a possible US interest rate rise hit the region’s stock markets.
The pan-European FTSEurofirst 300 index closed down 0.2 per cent to record a monthly loss of nine per cent – its worst monthly performance since August 2011. Volumes were relatively thin as the British market was closed for a public holiday.
Germany’s Dax fell 0.4 per cent and also posted its worst monthly performance since August 2011. The Dax is currently some 17 per cent below a record high reached in April.
The Eurozone’s blue-chip Euro STOXX 50 index and France’s Cac both declined by 0.5 per cent.
The Federal Reserve left open on Friday the possibility of a September rate rise, although several of its officials said the prolonged turmoil in financial markets might delay the first policy tightening in nearly a decade.
On Thursday, ECB president Draghi will be the first major central banker to address a monetary policy meeting following the Fed’s Jackson Hole Symposium. Last week, ECB vice president Vitor Constancio said it is too early for the ECB to react to China’s situation as it is not clear how it would impact Eurozone’s economy.
IronFX Global strategist Marshall Gittler said: “We agree with him and we do not expect the bank to take any action at this meeting.”
Weaker Asian markets, coupled with more volatility in Chinese stocks which have fallen sharply this month amid signs of an economic slowdown in China, also weighed on European shares.
“The Chinese markets remain in a sensitive position and most market participants remain bearish despite the positive swings experienced within the Shanghai Composite Index late last week,” said FXTM research analyst Lukman Otunuga.
Shares in ArcelorMittal declined 4.3 per cent after the company’s South African division said it was planning to shut two mills in the country as it struggles with weak demand and lower prices. French telecoms group Iliad also fell 4.4 per cent, with some traders citing disappointment over its free cash flow levels.
Meanwhile, Eni rose 1.5 per cent after the Italian energy firm announced the discovery off Egypt of the largest known gas field in the Mediterranean.