By Sruthi Shankar and Shashwat Chauhan
(Reuters) – European shares closed lower on Monday, bogged down by heavyweight luxury and energy shares after disappointing Chinese data, while French shares underperformed after a surprise rating downgrade by Moody’s (NYSE:).
The pan-European index closed 0.1% lower to trade near a two-week low, with the auto sector declining in percentage terms, down 2.8%.
China-exposed luxury companies such as LVMH fell more than 1% after data showed Chinese retail sales growth in China is slowing.
Lower prices pushed energy down 1%, while health care helped reduce overall losses by 1.1%.
France’s blue chip lost 0.7% after credit rating agency Moody’s unexpectedly downgraded France’s rating from “Aa2” to “Aa3” on Friday, with a stable outlook.
The news came hours after President Emmanuel Macron appointed veteran François Bayrou as his fourth prime minister this year.
In Germany, parliament accepted Chancellor Olaf Scholz’s invitation to express no confidence in him and his government. It closed 0.5% lower.
Surveys showed Germany’s economic downturn eased slightly in December, but business activity still shrank for the sixth month in a row, while France’s services sector shrank further.
Overall, the decline in eurozone business activity eased this month as the dominant services sector regained momentum, as shown in HCOB’s preliminary composite Purchasing Managers’ Index for the eurozone.
“With the eurozone in a period of domestic and global uncertainty, the consensus appears to undermine the importance of the European Central Bank’s cuts to the bloc’s cyclical outlook,” wrote economists at GlobalData.TSLombard.
ECB President Christine Lagarde said the central bank will cut rates further if inflation continues to decline towards the 2% target, while Vice President Luis de Guindos said the ECB is confident inflation will converge by 2025 towards the target of 2%.
The European Central Bank cut interest rates last week for the fourth time this year. This week, the monetary policy decisions of the US Federal Reserve, the Bank of England and the Bank of Japan are on the radar.
Porsche fell 2.2% after warning it could write down the value of its stake in Volkswagen (ETR:) by up to 20 billion euros ($21 billion). It expects the group’s after-tax result to be “significantly negative” in 2024.
Volkswagen closed 2% lower.
Ladbrokes (LON:) owner Entain fell 6.3% after Australia’s financial crime watchdog took legal action against its Australian unit.
