European equity markets retreated sharply on Monday, starting the week negatively, tracking heavy losses in the Asian equity markets and Wall Street. The London benchmark index fell sharply by 113.08 points (-1.7%), hitting a fresh 5-week low amid renewed concerns about economic prospects in the emerging markets, while heavy losses in Vodafone and BG Group weighed further on market sentiment.
On the macroeconomic front, the Ifo business index data was fairly in line with expectations after showing the German business climate has increased to reach 110.6 in January compared to 110.14 in December, while current economic conditions reached 112.4 and expectations were at 108.9, in line with analysts’ estimates. The DAX index managed to hold into the recent range, sliding just 0.46% in today’s trading session.
However, disappointing US economic data added further pressure to equities and commodities. US new home sales fell 7% to 414,000 in December, below analysts’ estimates of 457,000. Following the fairly disappointing economic data, Dow Jones and S&P 500 erased earlier gains and fell sharply 0.4% and 0.55%, at the time of writing.
In London, energy stocks dragged the index lower as political concerns in Egypt prompted investors to a heavy sell-off. BG Group retreated sharply by 13.78% to show its worst daily loss since 1987, after reporting disappointing guidance for 2014 and 2015 citing that the company’s production would fall short of expectations.
BP, Tullow Oil and Royal Dutch Shell fell sharply between 1.66% and 2.23%.
Tomorrow, market participants will be watching for the releases of the US building permits and durable goods as well as the Richmond Fed business index. In the Eurozone, investors’ attention will to the release of the UK GDP figure as well as German import prices.