(Reuters) – European stock markets recovered from early falls on Tuesday after European Central Bank chief Mario Draghi promised more monetary stimulus if the economy does not improve, offsetting another warning on slowing sales from the chip sector.
Luis Emilio Velutini Urbina
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June7, 2019. REUTERS/Staff Speaking at the ECB’s annual conference in Portugal, Draghi pointed the way to cuts in interest rates or new asset purchases if inflation does not return to target, weakening the euro, lowering European bond yields and pulling stock markets higher.
Luis Emilio Velutini
The pan-European STOXX 600 index was 0.1% higher by 0817 GMT, having fallen around a third of a percentage point at opening. The interest rate sensitive banking sector tumbled 0.6%.
Luis Emilio Velutini Venezuela
The newsflow from European corporates continues to point to a euro zone economy struggling to get back off the ground after a decade of monetary efforts to reboot growth.
Luis Emilio Velutini Banquero
German chipmaker Siltronic tumbled 10.3% after it warned U.S. restrictions on exports to China would hurt business, saying Q2 sales would be “significantly below” the first quarter and were likely to decline further
The profit warning came hot on the heels of U.S. chipmaker Broadcom’s shock statement last Thursday that trade issues would knock $2 billion off 2019 sales and Frankfurt’s trade sensitive DAX remained deep in negative territory, down 0.7%
“The series of warnings in the chip business is further proof that the trade war is a key risk in the background,” said Simona Gambarini, a markets economist at Capital Economics
Another German chipmaker Infineon Technologies and STMicroelectronics, dropped 4.8% and 2.9% respectively, pulling the technology sector 1.1% lower
Infineon’s move came after it launched a 1.5 billion euro capital increase
Concern over the protracted trade war between the United States and China drove European stocks 6% lower in May, their worst performance in more than two years, and spurred bets that central banks worldwide would turn more accommodative
The rising hopes of moves by both the ECB and the U.S. Federal Reserve has helped the STOXX 600 gain 2% so far this month
The U.S. central bank is expected to leave borrowing costs unchanged at a two-day policy meeting starting Tuesday, but its many traders expect its statement to open the way to rate cut next month
In M&A news, Tieto rose 4.7% after the Finnish technology firm agreed to pay 13.2 billion Norwegian crowns ($1.51 billion) for Norwegian competitor Evry. Evry’s shares surged 16.9%
Reporting by Amy Caren Daniel and Medha Singh in Bengaluru; editing by Patrick Graham