Weekly recap: European markets retreat following weak US data

Major benchmark indices across Europe, the US and Asia are largely on track for a negative weekly close, driven by prevailing risk-aversion sentiment following weak economic data from both the US and China.

European stock markets retreated from record highs, driven by global risk-off sentiment.
Wall Street faltered following weak economic data, raising concerns that the world’s largest economy may be heading for a rapid downturn.
Nvidia, the iconic artificial intelligence (AI) stock, saw a 10% decline for the week, weighing on global tech shares, while European semiconductor giant ASML suffered an 11% loss.
Meanwhile, haven assets such as gold, the Japanese yen, and government bonds held steady, as they are seen as safe havens.
Major central banks are expected to lower interest rates amid cooling inflation and slowing economic growth.
Conversely, oil prices hit a nine-month low due to risk-off trades, which exerted downward pressure on energy stocks across the board. 
European stock markets extended their losses for a fourth consecutive trading day on Thursday and are on course to end the week in negative territory.
On a weekly basis, the Euro Stoxx 600 dropped by 2.27%, the DAX declined by 1.75%, the CAC 40 slumped by 2.61%, and the FTSE 100 was down by 1.61%.
A combination of souring sentiment and analysts’ downgrades on some large-cap stocks weighed on the broader markets.
UBS downgraded ASML from ‘buy’ to ‘hold’, leading shares of the Dutch chip equipment manufacturer to plunge 9.5% to a one-month low on Wednesday, following the global Nvidia-led tech selloff.
Additionally, a Morgan Stanley analyst cut the price target for LVMH, sending Europe’s largest consumer stock down nearly 4% on Wednesday, with sluggish consumer demand in China cited as the main reason for the reduction.
At the sector level, most sectors within the Euro Stoxx 600 have been in the red this week, with consumer and energy stocks leading the losses.
Over the past five trading days, LVMH has dropped 7.28%, Hermès has slumped by 8.27%, and Christian Dior has fallen by 6.04%.
Among energy stocks, Shell fell by 4.33%, TotalEnergies slipped by 2.56%, and BP dropped by 4.21%.
Meanwhile, interest rate-sensitive sectors, including utilities and real estate, benefited from growing expectations of rate cuts, both rising by more than 1% from last week.
On the economic front, revisions to the Eurozone’s services Purchasing Managers’ Index (PMI) added further downward pressure, as concerns over the economy grew.
However, the euro remained near a year-high against the US dollar due to expectations that the Federal Reserve (Fed) will deliver deeper cuts than the European Central Bank (ECB).
The final reading of the Eurozone’s GDP will be closely watched today.
US stock markets are on track for a negative close this week, as sentiment soured following a spate of weak economic data.
Technology shares led the broad losses, with a sharp retreat in the stocks of well-known chipmakers, particularly Nvidia.
The US manufacturing PMI indicated that factory activity contracted for the fourth consecutive month, while signs of a slowdown emerged in the labour market.
Private payroll data revealed the weakest growth since 2021. Today’s non-farm payroll data could have a significant impact on global market trends.
Over the past five trading days, the Dow Jones Industrial Average fell by 1.94%, the S&P 500 declined by 2.57%, and the Nasdaq Composite slumped by 3.31%, with technology shares weighing heavily on the indices.
Seven out of eleven sectors posted weekly losses, with technology and energy leading the downturn, falling by 4.2% and 3.71%, respectively.
Conversely, real estate, consumer staples, and utilities edged higher on a weekly basis, as these sectors are generally perceived to perform well during periods of crisis and interest rate cuts.
The consumer discretionary sector also outperformed, buoyed by a rebound in Tesla and Amazon shares.
Nvidia extended its losses, down 17% over the past two weeks. According to a report by Bloomberg, the chipmaker received a subpoena from the US Department of Justice (DOJ) in connection with an antitrust investigation.
However, the company has denied the claims.
Other stocks within the “Magnificent Seven” group showed mixed performance on a weekly basis, with Tesla up by 11.87%, Amazon rising by 4.15%, Alphabet falling by 3.59%, and Apple dropping by 1.81%. Microsoft and Meta were flat for the week.
Recession fears have resurfaced, as yields on US 2-year and 10-year government bonds briefly reversed their inversion.
Historically, an economic recession often follows the reversal of an inverted bond yield curve.
Major benchmarks across Asia are also in the red for the week, with Japan’s Nikkei 225 shedding more than 5% due to a strengthened Japanese yen.
Japan reported stronger-than-expected wage growth data for July, which may prompt the Bank of Japan (BOJ) to continue tightening its monetary policy.
The yen’s surge, coupled with BOJ’s rate hikes, led to a steep global equity market drop earlier in August.
Australia’s ASX 200 and China’s Hang Seng Index also ended lower for the week, reflecting the global risk-off sentiment.
China reported weaker-than-expected manufacturing PMI and Caixin services PMI, suggesting that its economy remains on a faltering recovery path.
Meanwhile, the Reserve Bank of Australia reiterated its hawkish stance on monetary policy, despite a slowdown in second-quarter economic growth.