European markets continued to decline on Monday as warnings from Volkswagen and Stellantis NV about lower profits weighed heavily on the auto sector. The Stoxx Europe 600 Index dropped 1% after hitting a record high last week, with significant declines in automotive, travel, and leisure stocks. Most sectors experienced losses.
Germany's government is preparing to lower its economic growth forecast, now predicting zero growth for 2024. This news further exacerbated the index's decline. Stellantis was among the worst performers on the Stoxx Europe 600 Index, plunging up to 15% after revising its profit margin projections downward. Similarly, Volkswagen (VWAGY, Financial) saw its shares fall following a downgrade in performance guidance. Aston Martin's stock also plummeted as much as 28% after lowering its outlook.
Despite reaching historic highs last week, European markets face several fourth-quarter risks, including corporate earnings reports and escalating tensions in the Middle East. According to Joachim Klement, head of strategy, economics, and ESG at Panmure Liberum, the European markets are expected to remain cautious, with focus shifting towards manufacturing and inflation data set to be released later in the week.
Germany's inflation rate has fallen below the European Central Bank's (ECB) 2% target for the first time since February 2021, potentially supporting another rate cut by the ECB in less than three weeks. Further boosting rate cut expectations, ECB President Christine Lagarde expressed increased optimism about managing inflation, suggesting that this outlook will be considered in their October rate decision.
