Europe midday: Stocks drop as manufacturing decline continues

(Sharecast News) - European equities dropped into the red by Monday lunchtime despite a positive start, as a raft of manufacturing surveys across the continent continued to paint a gloomy picture. By late morning, the Europe Stoxx 600 index was down 0.4% at 448.54 with equity indices in the UK, France, Germany and Italy all in negative territory, while Spain's Ibex 35 was more or less flat.

Paolo Grignani, economist at Oxford Economics, said Monday's data confirmed the "dire outlook" for the Eurozone's industrial sectors, with the headline manufacturing PMI for the single-currency area falling to 43.4 in September, down from 43.5 in August and in line with the flash estimate.

In terms of individual nations, the survey was revised down in Germany and up in France, compared with flash estimates; while in Italy and Spain, where there was no flash estimate, the PMIs improved modestly on the previous month. Nevertheless, all areas remained well below the key 50-point level which separates growth from contraction.

"The sector is in a deep downturn, with most countries' manufacturing PMIs in contractionary territory. Output and new orders are falling, as well as employment expectations," Grignani said.

"These readings support our expectation of a contraction in the eurozone manufacturing sector in both Q3 and Q4 2023. But signs that the sector is bottoming out are increasing, suggesting that the modest recovery we expect for 2024 is still on the table."

Stocks had opened higher initially as investors reacted to the news that the US government narrowly avoided a shutdown, passing a 45-day Continuing Resolution that shifts the funding deadline to 17 November.

In company news, BAE Systems shares rose after the defence giant signed a £4bn submarine contract for the Aukus security pact with Australia and the US.

French media group Vivendi was performing well after Barclays upgraded the stock to 'overweight'.

Financial stocks were under the weather, with Allianz, Santander, AXA and Deutsche Borse trading in the red.