# European shares retreat as factory activity falters
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-08-01
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: European Shares Retreat as Factory Activity Falters, Risks
Meta Description: European stocks slip as factory activity in Eurozone and China falters, raising concerns about global economy. Stay updated with Reuters for more.
URL: https://financedigest.com/european-shares-retreat-as-factory-activity-faltershtml

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# European shares retreat as factory activity falters

By Sruthi Shankar

(Reuters) -European stocks slipped on Tuesday, with the German DAX pulling back from record highs as shrinking factory activity in the euro zone and China underscored growing risks to the global economy from rising interest rates.

The pan-European STOXX 600 index was down 0.5%, with carmakers, real estate and miners leading sectoral declines.

Losses accelerated across euro zone markets after a survey showed manufacturing activity in the bloc contracted in July at the fastest pace since May 2020 as demand slumped despite factories [cutting their prices](https://www.financedigest.com/britains-ocado-follows-rivals-in-cutting-some-prices.html "Britain’s Ocado follows rivals in cutting some prices") sharply.

There was considerable weakness seen in Germany, Europe’s largest economy, while France and Italy, the second- and third-largest euro zone economies, also recorded marked deteriorations since June.

Surveys earlier showed Asia’s factory activity also shrank in July, a sign slowing global growth and weakness in [China’s economy](https://www.financedigest.com/oil-prices-wobble-on-worries-over-china-economy-us-rate-path.html "Oil prices wobble on worries over China economy, US rate path") were taking a toll on the region’s fragile recovery.

The auto-heavy German DAX fell 0.8% after touching a record high in the previous session, with shares of BMW and Mercedes Benz falling 4.4% and 1.8%, respectively.

We’re quite defensive in our sector allocation,” said Joost van Leenders, senior investment strategist at Van Lanschot Kempen, warning that the impact of aggressive interest [rate hikes](https://www.financedigest.com/global-shares-rise-dollar-rebounds-as-fed-seen-on-target-for-rate-hike.html "Global shares rise, dollar rebounds as Fed seen on target for rate hike") is yet to be felt.

“The cyclicals have been much stronger than the PMIs. The risk-on rally has been sometimes out of line with the fundamental factors.”

Signs of easing inflation have spurred hopes that the Federal Reserve and the European Central [Bank are near](https://www.financedigest.com/nearly-half-of-banking-customers-say-they-are-missing-the-human-connection-in-banking.html "Nearly half of banking customers say they are missing the human connection in banking") the end of their monetary tightening, boosting stock markets across both sides of the Atlantic in recent weeks.

The second-quarter reporting season also kicked into high gear. Analysts see an 8.1% contraction in quarterly profit for STOXX 600 companies, according to Refinitiv IBES data, a slight improvement from the 9.2% drop forecast at the start of the earnings season.

Among companies that reported, DHL Group fell 4.7% after the freight forwarder reported a slump in quarterly earnings as high inflation, the war in Ukraine and the ongoing energy crisis weighed on consumer demand and freight rates.

In the UK, HSBC Holdings climbed 2.4% after the lender raised its key performance target, while BP gained 1.2% after the energy giant [boosted its dividend](https://www.financedigest.com/aegon-bets-on-transamerica-to-boost-cash-flow-and-dividend-in-2025.html "Aegon bets on Transamerica to boost cash flow and dividend in 2025") by 10%.

Fresnillo tumbled 6.9% as the Mexico-focused miner posted a near 24% slump in half-year core profit.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sohini Goswami and Eileen Soreng)


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