European Stocks Dip as Global Economic Concerns Rise

European stocks plummeted to a two-week low due to fears of a U.S. economic slowdown and weak Chinese data. The STOXX 600 index dropped 1%, echoing Wall Street declines. Notable losers included luxury and semiconductor sectors. While European markets have gained 7.5% this year, concerns persist.

European stocks hit a two-week low on Wednesday, with markets unsettled by fears of an imminent slowdown in the United States and lackluster economic data from China.

The pan-European STOXX 600 index fell 1%, influenced by a broad selloff in major European markets, which all declined between 0.7% and 1%. Volatility spiked to its highest level since August 9. Overnight selloff on Wall Street saw major indexes record their largest daily percentage drops since early August, driven by weak manufacturing data.

China's manufacturing activity declined to a six-month low in August, impacting European luxury stocks like LVMH Holdings, Richemont, and Christian Dior. "Fresh worries about the health of the global economy are gripping markets," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The semiconductor sector faced significant losses, with ASML Holdings dropping nearly 5% after a UBS downgrade and following a slump in Nvidia's stocks. Despite widespread selling pressure, European equities have risen by 7.5% this year, buoyed by prospects of lower borrowing costs in 2024.

Germany's services sector exhibited slowing growth for the third consecutive month in August, further signaling that Europe's largest economy is losing momentum. The DAX index fell 0.8%. Upcoming economic data, including July producer prices, will offer more insight into the region's interest rate outlook.

Commerzbank shares slid 2.5% following news that the German government plans to reduce its stake in the lender. British housebuilder Barratt saw a 2.1% decline after reporting a 56% drop in annual profit, citing sensitivity to mortgage affordability. Direct Line Insurance Group dipped 1.5% after missing profit expectations for its motor insurance division.

(With inputs from agencies.)