European shares tumbled again on Monday as a profit warning from online fashion retailer Asos sent retail stocks spiralling down as investors fretted that consumers are failing to deliver the traditional pre-Christmas spending boost to markets.
Euro zone stocks were down 0.4 per cent while Germany’s DAX fell 0.1 per cent and Britain’s FTSE 100 lost 0.2 per cent by 9.30am.
Asos shares plunged 41 per cent after the British online fashion retailer - a favourite of investors keen to back internet-focused retail - cut its forecasts, saying November was “significantly behind expectations”.
It was the latest in a string of profit warnings and negative outlooks from retailers including Sports Direct, Dixons Carphone and Bonmarche highlighting poor performance in the pre-Christmas trading period.
Shares in Zalando, a German rival of Asos and Europe’s biggest online retailer, dropped 15.3 per cent, the biggest STOXX 600 fallers. The selling wiped £1.3 billion off Asos’ market cap and €1 billion off Zalando’s in the first 30 minutes of trading.
Asos peer Boohoo fell 18 per cent at the open, before recouping some losses after it reported record Black Friday sales. It was last down 10.6 per cent. Swedish retailer H&M fell 3.8 per cent despite reporting in-line sales figures, as the Asos stress spread.
Next and Marks & Spencer fell 3.7 per cent and 2.4 per cent. Puma also fell 5.6 per cent, Hugo Boss tumbled 4.6 per cent and B&M European Value Retail lost 4.3 per cent.
Adidas was the biggest faller on the DAX. Europe’s retail sector fell 2.1 per cent, the worst-performing and hitting its lowest level since July 2016.
Outside retail, mergers and acquisitions drove some big moves with Ingenico tumbling after it said it had dropped talks over a possible deal. The stock fell 6 per cent to its lowest level in five years.
Innogy shares fell 2 per cent and SSE fell 1.6 per cent after the two energy firms scrapped plans to merge their British energy retail units, saying they could not agree on new commercial terms after Britain’s regulator proposed a cap on energy bills.
Swedish electrical components maker Dometic fell 6.7 per cent after Kepler Cheuvreux cut their rating on the stock to a “hold” from a “buy”.
Leading euro zone stocks and Britain’s FTSE 100 were all set for their worst quarter since 2011, when the region was in the throes of the sovereign debt crisis.
Investors smarting from a tough year also had a week of central bank events looming with meetings of the US Federal Reserve and the Bank of England likely to move markets.
Despite this, Mark Haefele, chief investment officer for Global Wealth Management at UBS, said: “On balance, we are not yet convinced that the profitable thing to do is to position for further policy errors or poor sentiment upending the economy.”
He concurs with the Fed’s assessment that the risk of a recession in the next 12 months is only around 20 per cent, and sees global equities as “reasonably valued”. Valuations across global stocks have fallen as a result of recent market turbulence. – Reuters
