European Stocks Drop on China, Lanxess Warning
European stocks dropped on Monday as a warning from German chemicals company Lanxess AG and a weaker-than-expected reading on Chinese manufacturing activity weighed on the market.
The Stoxx Europe 600 Index fell 0.7%, with the chemicals sector leading the losses. Lanxess AG dropped as much as 8.2% after the company said it expects a “significant” decline in sales and earnings in the second quarter.
The decline in European stocks was also driven by a weaker-than-expected reading on Chinese manufacturing activity. The Caixin/Markit Manufacturing Purchasing Managers’ Index fell to 50.2 in June, down from 50.6 in May.
China Manufacturing Activity
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) is a survey of purchasing managers in China’s manufacturing sector. The index is a key indicator of the health of the manufacturing sector and is closely watched by investors.
The index fell to 50.2 in June, down from 50.6 in May. A reading above 50 indicates expansion in the sector, while a reading below 50 indicates contraction. The decline in the index was driven by a slowdown in new orders and output.
The weaker-than-expected reading on Chinese manufacturing activity weighed on European stocks, as investors worried about the impact of the slowdown on global economic growth.
Lanxess AG Warning
German chemicals company Lanxess AG also weighed on European stocks on Monday. The company said it expects a “significant” decline in sales and earnings in the second quarter.
The company said it expects sales to decline by 10-15% in the second quarter, compared to the same period last year. It also expects earnings before interest and taxes (EBIT) to decline by 20-30%.
The company said the decline in sales and earnings was due to the impact of the coronavirus pandemic on its business. It said the pandemic had caused a “significant” decline in demand for its products, particularly in the automotive and construction sectors.
Impact on European Stocks
The warning from Lanxess AG and the weaker-than-expected reading on Chinese manufacturing activity weighed on European stocks on Monday. The Stoxx Europe 600 Index fell 0.7%, with the chemicals sector leading the losses.
Lanxess AG dropped as much as 8.2% after the company said it expects a “significant” decline in sales and earnings in the second quarter. Other chemicals companies also fell, with BASF SE dropping 2.3% and Covestro AG falling 1.9%.
The decline in European stocks was also driven by a weaker-than-expected reading on Chinese manufacturing activity. The Caixin/Markit Manufacturing Purchasing Managers’ Index fell to 50.2 in June, down from 50.6 in May.
Outlook
The outlook for European stocks remains uncertain, as investors worry about the impact of the coronavirus pandemic on the global economy. The decline in Chinese manufacturing activity and the warning from Lanxess AG have added to investor concerns.
In the near term, investors will be closely watching economic data for signs of a recovery. If the data continues to show a slowdown in economic activity, European stocks could remain under pressure.