Europe midday: Losses extend as EZ retail sales fall

(Sharecast News) - European shares extended losses at the end of the morning session after eurozone retail sales fell and investors fretted about the Israel-Hamas war escalating into a wider conflict. The pan-European Stoxx 600 index was down 0.22% at 475.31. Germany's DAX bucked the downbeat trend with a 0.08% gain after some upbeat trade data, although factory orders missed forecasts.

Investors will be looking ahead to US inflation data and major bank earnings in the week ahead for further clues on the state of the economy and the path of rate cuts from the Federal Reserve.

The December consumer price index is set for release Thursday, while the producer price index is due out on Friday.

"Wariness has returned at the start of the week, as investors assess the risks of geo-political conflict, amid fresh signs of global economic slowdown and uncertainty about the trajectory of inflation," said Hargreaves Lansdown economist Susannah Streeter.

"Such are the risks of the Israel-Gaza conflict widening, US Secretary of State Antony Blinken has embarked on a whistlestop diplomatic tour, in an attempt to calm inflamed tensions."

"It comes after Israel's defence minister described the hostilities the country is facing as an axis rather than a single enemy. Concerns are rising that this could lead to fresh violence, particularly in Lebanon."

On the economics front, eurozone retail sales fell 0.3% in November, according to Eurostat, cutting into October's upwardly revised 0.4% jump and marking the sharpest decline in retail volume since August.

On an annualised basis, retail sales fell 1.1% year-on-year for a 14th consecutive period of contraction.

In Germany, the trade balance jumped in November after a huge rise in monthly exports smashed economists' expectations.

Germany exported a total of €131.2bn in goods during the month of November on a calendar and seasonally adjusted basis, up 3.7% from October.

That came after a revised 0.4% decline the month before and was well ahead of the 0.3% increase expected by analysts.

Meanwhile, imports rose 1.9% to €110.8bn, rebounding after a revised 1.1% drop the month before; the consensus estimate was for just a 0.2% rise month-on-month.

The resulting trade balance came in at €20.4bn, up from €17.7bn in October and much higher than the €11.9bn surplus registered in November 2022. Analysts were expecting a figure closer to €17.9bn.

However, factory orders increased by less than expected in November,, according to provisional figures released on Monday by the Federal Statistical Office, Destatis.

Price adjusted new orders in manufacturing rose by just 0.3% in the month of November, rebounding slightly after a revised 3.8% slump in October but well below the 1% increase expected by economists.

In equity news, Danish jewellery maker Pandora said on Sunday its revenue growth and earnings in 2023 had exceeded the group's expectation, lifted by strong demand and "solid profitability" in the final months of the year.

Energy giant Shell was weaker as it flagged fourth-quarter impairments of up to $4.5bn, primarily in its chemicals and products division. The oil major, updating on fourth-quarter trading, said non-cash post-tax impairments were expected to be between $2.5bn and $4.5bn.

Housebuilders were in focus as Barclays upped Bellway to 'overweight, but cut Barratt Developments and Berkeley to 'equalweight'.

Reporting by Frank Prenesti for Sharecast.com