Markets

European stocks close out first half of 2021 up over 13%, dip on final day of second quarter

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Key Points
  • The pan-European Stoxx 600 index fell Wednesday but closed out the first half of 2021 up more than 13%.
  • Traders in Europe kept across a host of economic data on Wednesday.
  • Global markets are looking ahead to potentially significant U.S. labor market data later in the week.

LONDON — European stocks posted solid gains for the first half of 2021, but dipped slightly on the final trading day of the second quarter amid persistent concerns over the coronavirus pandemic and rising inflation.

The pan-European Stoxx 600 provisionally closed down by 0.8% on Wednesday, with autos shares sinking 1.9% to lead the losses. The benchmark was still up over 13% year-to-date, however.

European investors reacted to a host of economic data on Wednesday. U.K. first-quarter GDP was confirmed at -1.6% quarter-on-quarter, slightly below expectations, while business investment fell 10.7% quarterly as the country endured stringent lockdown measures.

The Office for National Statistics also revealed that British household savings grew sharply during the period, lifting hopes of pent-up consumer spending as the economy reopens.

Euro zone inflation cooled in June to 1.9% from 2.0% in May, in line with forecasts and the European Central Bank's target of "close to but below 2%." However, it is expected to spike above 2.5% again towards the end of the year, according to the ECB's latest projections.

"This is in part because oil price inflation has started to drop, because a year-on-year comparison with rising oil prices last June mechanically reduces the figure," said Willem Sels, chief investment officer for private banking and wealth management at HSBC.

"In fact, it was not just oil that rose in June 2020, other prices went up as well as parts of Europe came out of their first lockdown. For those goods too, the base effects are dampening inflation in this month's reading."

Global markets are looking ahead to potentially significant U.S. labor market data later in the week, hoping to gauge whether the U.S. Federal Reserve will be forced to consider tightening monetary policy sooner than planned. The Labor Department's key jobs report is due Friday.

Shares in Asia-Pacific were modestly higher on Wednesday despite a slowdown in China's official manufacturing Purchasing Manager's Index (PMI), while U.S. stocks churned near record highs.

In corporate news, the European Commission on Tuesday announced that it had begun an in-depth study of British Airways parent IAG's planned takeover of Spain's Air Europa. IAG shares were slightly higher by the close.

Meanwhile, Ray-Ban manufacturer EssilorLuxottica is pushing ahead with its planned acquisition of Dutch eyewear chain Grandvision. EssilorLuxottica rose marginally, while Grandvision soared 14% on the news.

Elsewhere, German biopharmaceutical company MorphoSys dropped to the bottom of the Stoxx 600, down 4.6%.

At the opposite end of the benchmark, WM Morrison climbed 4.5% after a top shareholder said U.S. private equity firm Clayton, Dubilier & Rice should up its takeover offer for the British supermarket operator to around $9 billion.

— CNBC's Ryan Browne contributed to this report.

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