Europe close: Auto stocks weigh heavily as Stoxx 600 retreats from record high

(Sharecast News) - European stocks fell sharply on Monday as the last trading session of the fourth quarter ended on a negative note, with heavy falls from auto manufacturers weighing on markets. Markets were adopting a risk-off approach amid ongoing airstrikes in the Middle East, while investors were taking profits ahead of some key economic data over the coming days, including eurozone inflation figures on Tuesday and US non-farm payrolls on Friday.

The Stoxx 600 finished 1.0% lower at 522.88, pulling back after hitting a new record high of 528.08 on Friday, as global stock markets rallied on the back of a bumper stimulus package in China.

"It's remarkable how sentiment can swiftly change direction on the markets. After last week's strong showing led by Chinese stimulus measures, US and European markets were in retreat at the start of the new trading week," said Dan Coatsworth, investment analyst at AJ Bell.

Oil prices were higher on Monday as Israel's bombardment of Lebanon and Yemen stepped up a gear, with Brent rising 1.1% to $72.31 a barrel. Israel has warned that Iran could also become a target, which "could affect the distribution of oil from Iran and the passage of tankers through the Strait of Hormuz, a key route for global crude supplies", said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

On Tuesday morning, investors will get their first look at eurozone inflation figures for September. However, analysts believe risks are to the downside after national figures already released across Italy, Spain, France and Germany over recent days have shown a bigger-than-expected slowdown in inflation.

The flash reading of eurozone consumer price inflation is scheduled for release at 1100 BST and is predicted to show that price growth slowed from 2.2% to 1.9% - its lowest since June 2021 and below the European Central Bank's 2% target in September.

"Markets have shifted their expectations for further rate cuts as recent survey data suggest a weaker growth outlook for the eurozone. [...] We think these developments may provide ECB doves with sufficient reason to argue for an October rate cut," said Alexander Valentin, senior economist at Oxford Economics.

Stellantis, Aston Martin pull auto stocks lower

Shares in Stellantis tumbled 15% in Milan after the Chrysler, Peugeot and Jeep maker became the latest auto manufacturer to scale back vehicle delivery forecasts this year, cutting shipment estimates for North America while citing increased competition from China. The Netherlands-based company said its adjusted operating income margin is now expected to average between 5.5% and 7.0% for the full year, compared with earlier guidance for a double-digit percentage.

London-listed luxury carmaker Aston Martin dropped 23% after cutting full-year profit targets as a result of a cut to wholesale volume guidance due to supply chain disruption and weak demand in China. Adjusted EBITDA for the full year will now be "slightly below" 2023, while the target of positive free cash flow in the second half will not be achieved.

The news followed profit warnings by Volkswagen, Mercedes-Benz and BMW over the past month, with all three peers falling more than 2% on Monday.

Another heavy faller was UK-listed Rightmove after Rupert Murdoch's Australian property business REA Group said it was abandoning its pursuit of the property portal after a fourth takeover proposal, this time of £6.2m, was rejected. Shares finished 8% lower.