European Stocks Take a Tumble as Tech and Sportswear Companies Feel the Heat

On Friday, the European stock market experienced a downturn, primarily driven by declines in the technology and sportswear sectors. This was in response to the Red Sea attacks, which raised fears of potential disruptions to global trade. Furthermore, investors were eagerly awaiting crucial U.S. inflation data, which could offer insights into the possibility of reduced interest rates in the coming year.

By 0817 GMT, the pan-European STOXX 600 index had fallen by 0.2%, putting it on track to record its most lacklustre weekly performance in six weeks. The technology sector, in particular, suffered a significant setback, with Netherlands-based Prosus experiencing a substantial drop of 14.5%, leading to a 1.2% slide in the sector.

The personal and household goods sector also faced challenges, with major sportswear brands Adidas and Puma witnessing declines of 6.1% and 4.4% respectively. This was exacerbated by U.S. competitor Nike lowering its annual sales forecast, further impacting investor sentiment. Additionally, JD Sports saw a 4.9% drop, contributing to a broader 0.9% decline in the retail sector.

With the approach of Christmas, attention turned to the U.S. core personal consumption price index reading, which was scheduled to be released later in the day. This metric holds significant interest for investors as the Federal Reserve’s preferred inflation gauge.

Following the recent Red Sea attacks, two new shipping companies, including Germany’s Hapag-Lloyd, announced their decision to avoid the region due to concerns about disruptions in global trade. This move came after Yemen’s Houthi group targeted vessels, prompting the establishment of a naval task force to address the issue. Surprisingly, Hapag-Lloyd’s shares managed to edge up by 1% despite the broader market downturn.

It became increasingly clear as the day unfolded that market sentiment could be heavily influenced by the outcome of the U.S. inflation data. Furthermore, developments in global trade and the potential for further disruptions in the future are likely to remain key concerns for investors in the coming days.

This article was reported by Khushi Singh in Bengaluru and subsequently edited by Dhanya Ann Thoppil.