London: European shares were lower on Thursday afternoon, hit by growth worries and led by German stocks as weak Chinese export growth hit carmakers, while slower euro zone PMI data dimmed hopes of a positive US manufacturing number.
The chance of a sustained recovery in China’s manufacturing sector fell after new export orders slipped in August, partly due to the sovereign debt problems in developed countries adding to worries about global growth.
The euro zone manufacturing sector also showed signs of weakness as it contracted for the first time in almost two years and in a worrying sign German activity which have supported growth in the bloc slowed.
The German market, which relies heavily on China to export, was down 1.8%, underperforming the other major European exchanges on the worries about a slowdown in global growth.
Carmakers were amongst the hardest hit, with Daimler’s down 2.9% and featuring on the German DAX’s worst performers list.
German group Porsche, which also relies on China for sales, was 3.8% lower and a standout loser in the STOXX Europe 600 Automobiles & Parts index , down 2.4%.
The carmaking sector has fallen 28% since the sell-off began in July fuelled by recession fears after weak economic data, a sovereign credit downgrade in the United States and contagion worries in the euro zone peripheral debt crisis.
“Investors are selling down cyclical names geared to economic activity and Germany is underperforming as it is the most susceptible to that,” said Ian King, head of international equities at Legal & General, which has 356 billion pounds ($580 billion) under management.
Fiat , down 4.2%, was hit by a broker downgrade as Citigroup cut its rating to “hold” from “buy” to place it also amongst the bottom performers.
Miners, also correlated to economic growth, were big movers on the downside, with the STOXX Europe 600 Basic Resources index down 1.8%, taking its slide from July to 21%.
The pan-European FTSEurofirst 300 index of top shares was down 0.5% at 962.52 points by 1126 GMT, having been as low as 958.37, after a three-day rally.
The index briefly dipped to a session low as worries about the euro zone peripheral debt crisis grew following news of sluggish demand at the first Spanish bond auction since the European Central Bank started buying the country’s debt.
The euro zone’s blue chip Euro STOXX 50 index fell 1.1% to 2,277.80 having earlier tested a support level -- the 23.6% Fibonacci retracement level or 2,268.28 from its sell-off which began in July. Next resistance was seen at the 38.2% Fibonacci retracement level or 2,386.57.
US DATA EYED
The next set of data to assess global growth will be US weekly jobless claims at 1230 GMT and the US ISM August manufacturing index at 1400 GMT, with the all important US non-farm payrolls on Friday.
Analysts said investors were taking profits ahead of these figures.
“The ISM and the non-farm payrolls are two key data points,” said Philip Isherwood, European equities strategist at Evolution Securities. “After a reasonable rally you maybe take some profits, if you have no idea what the non-farm figure will be. It is a volatile number.”