European stocks retreat as tech continues to struggle; Royal Mail up 15%

European stocks retreat as tech continues to struggle; Royal Mail up 15%

European markets pulled back further Tuesday as steep declines in the dominant U.S. tech sector continue to weigh on investor sentiment.

The pan-European Stoxx 600 slid 0.9% below the flatline by mid-morning, with the tech sector falling another 2% as all sectors and major bourses fell into negative territory.

Revised data published Tuesday showed that second-quarter euro zone GDP (gross domestic product) contracted by 14.7% year-on-year and 11% from the previous quarter, less than initial estimates but still its sharpest decline on record.

European stocks received a positive handover from Asia Pacific, where Japanese shares led gains despite Japan posting a second-quarter annualized GDP contraction of 28.1%.

U.S. futures are mixed Tuesday as Wall Street continues to reel from its worst tech sell-off in five months, driven by 2020’s market leaders Amazon, Apple, Microsoft and Facebook. Futures on the Nasdaq are pointing sharply lower on Tuesday morning.

Tensions between Washington and Beijing remain on the radar after U.S. President Donald Trump on Monday again raised the idea of an economic “decoupling” from China.

Back in Europe, the U.K. is planning to ramp up its preparations to leave the European Union without a deal if no free trade accord can be reached this week. The Financial Times reported that Prime Minister Boris Johnson’s government intends to legislate to override aspects of the Withdrawal Agreement it signed in January, with the EU warning Monday that there will be no deal if this course of action is pursued.

Coronavirus concerns are also back on the agenda after the U.K. reported almost 3,000 new daily cases on both Sunday and Monday, with England’s deputy chief medical officer saying the situation is now a serious concern.

In corporate news, Reuters reported citing sources that Spanish lender Caixabank and state-owned Bankia are nearing an agreement to establish Valencia as their new joint headquarters, with other components of a possible takeover still under consideration.

British Airways parent IAG will hold its annual shareholder meeting Tuesday, with CEO Willie Walsh set to hand over the reins to Iberia CEO Luis Gallego as the troubled airline group seeks billions of euros from shareholders to weather the coronavirus storm. 

In terms of individual share price action, Royal Mail surged 15% to lead the Stoxx 600 in early trade after the British postal company raised its revenue target. At the other end of the European blue-chip index, builders’ merchant Travis Perkins fell 7.4% after reporting a steep decline in profits in the second quarter, while French utility EDF fell 6.5% after reporting a 17.6% fall in output in August.

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