Europe Markets

European stocks close lower as weak German data rattles markets; Thomas Cook collapses

Key Points
  • The pan-European Stoxx 600 was down around 0.8% during Monday, with most sectors and major bourses in negative territory.
  • British tour operator Thomas Cook collapsed early Monday morning, leaving thousands of holidaymakers stranded.
  • A reading of German factory sentiment hit its lowest level in more than a decade.

European shares were sharply lower Monday afternoon, as investors reacted to weaker-than-expected economic data and the collapse of one of the world's most well-known tour operators.

The pan-European Stoxx 600 was down around 0.8% during afternoon deals, with most sectors and major bourses in negative territory.

Europe's autos sector, mining sector, and banking index all traded sharply lower. France's Peugeot Citroen, Germany's Commerzbank and the Netherlands' ArcelorMittal were the worst performers from their respective sectors.

Fragile market sentiment deteriorated on Monday after business activity data from the bloc's biggest economy added to investors' recession fears.

German private sector activity shrank for the first time in six-and-a-half years in September, survey data showed, as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum.

Markit's flash reading of composite German PMI (purchasing managers' index) came in at 49.1 in September, down from 51.7 in the previous month.

The manufacturing element was particularly troubling, coming in 41.4. That's the lowest gauge of German factory sentiment for more than a decade. Any number below 50 indicates contraction.

We lowered our forecast for German growth, Goldman Sachs says
We lowered our forecast for German growth, Goldman Sachs says

Thomas Cook

Travel and leisure stocks traded marginally higher Monday afternoon. It comes after British tour operator Thomas Cook announced it had collapsed, leaving thousands of holidaymakers stranded.

CEO Peter Fankhauser apologized to the group's customers and staff, adding it was "a matter of profound regret" the firm was unable to secure a rescue package from its lenders. The tour operator's failure has put 22,000 jobs at risk worldwide.

European airlines and tour operator TUI rose to the top of the benchmark during lunchtime trade, with Britain's easyJet also surging higher on the news.

The collapse of Thomas Cook could cut come overcapacity that has hurt profits and weighed on holiday prices in recent years, Reuters reported, citing traders. Shares of TUI jumped more than 7% for the day.

Trade developments

Market focus was largely attuned to the latest progress in U.S.-China trade negotiations. The two countries had described their latest talks as "productive" and "constructive," but stocks on Wall Street fell Friday after Beijing officials canceled a visit to U.S. farms in Montana, cutting their trip to the country short.

Washington and Beijing have slapped tariffs on billions of dollars' worth of each other's goods since the start of an intense trade dispute which began last year.

Back in Europe, Britain's opposition Labour Party kicked off its annual party conference over the weekend. According to Reuters, the party is expected to decide between two Brexit policies on Monday — to campaign to remain in the EU in a second referendum or defer a decision on what position to take until after an election. The U.K. is slated to leave the EU on Oct. 31.

— Reuters contributed to this report.