European Markets Close Higher On Hectic Bargain Hunting In The Final Hour

After languishing in the red till well past noon on Monday, European Stocks rallied on hectic buying in the final hour to eventually close on a positive note.

Worries about inflation, rising interest rates and slowing growth rendered the mood bearish at the start, and most of the markets in the region, including the major ones, struggled for support till well past noon.

However, as stocks rallied on Wall Street after data showing a drop in U.S. manufacturing activity helped ease concerns about aggressive tightening by the Fed, European stocks started climbing higher. Bargain hunting at several counters helped as well in lifting the markets.

The British pound edged higher after the British government reversed plans to cut the highest rate of income tax that helped to spark a rebellion in her party and turmoil in financial markets.

"It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country," Chancellor of the Exchequer Kwasi Kwarteng said in a statement.

"As a result, I'm announcing we are not proceeding with the abolition of the 45p tax rate. We get it and we have listened. This will allow us to focus on delivering the major parts of our growth package," Kwarteng added.

The pan European Stoxx 600 climbed 0.77%. The U.K.'s FTSE 100 gained 0.22%, Germany's DAX surged 0.79% and France's CAC 40 gained 0.55%. Switzerland's SMI advanced 0.32%.

Among other markets in Europe, Austria, Denmark, Finland, Greece, Ireland, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Turkiye closed with sharp to moderate gains.

Belgium edged up marginally, while Czech Republic and Iceland ended weak.

In the UK market, BT Group rallied nearly 4.5%. Fresnillo, B&M European Value Retail, Barratt Developments, JD Sports Fashion, Persimmon, Airtel Africa, SSE, Vodafone Group, Legal & General Group, Taylor Wimpey, Aviva, Shell, BP, Burberry Group, Kingfisher and Anglo American Plc gained 2 to 4%.

Scottish Mortgage drifted down more than 4%. Endeavour Mining, Haleon, Flutter Entertainment, Diageo, Unilever and Coca-Cola HBC declined 2 to 3.5%.

In the German market, BASF, Covestro, E.ON, Continental, Vonovia, Deutsche Telekom, HelloFresh and RWE gained 2 to 3.4%.

Deutsche Wohnen, Infineon Technologies, Brenntag, HeidelbergCement, Deutsche Post, Siemens Healthineers, Daimler, BMW and Bayer also ended notably higher.

In Paris, Faurecia and Atos both gained about 5%. ArcelorMittal rallied 3.6%. Saint Gobain, Veolia, Valeo, Engie, Orange, Sanofi, Legrand, Societe Generale, Renault, STMicroElectronics, Essilor and Carrefour gained 1.3 to 3%.

Air France-KLM dropped more than 4%. Pernod Ricard ended nearly 3% down. Danone, AXA and L'Oreal also closed weak.

On the economic front, the euro area manufacturing sector contracted at the fastest pace since mid-2020 due to further slides in output and new orders, final data from S&P Global showed.

The final manufacturing Purchasing Managers' Index fell to 48.4 in September from 49.6 in the previous month. The score was slightly below the flash estimate of 48.5. The index slumped to its lowest level since June 2020.

France and Germany both recorded the worst deterioration in manufacturing sector conditions, with their respective PMIs at the lowest levels since the first wave of the COVID-19 pandemic in the first half of 2020.

France's manufacturing activity shrank the most since May 2020 as high prices lowered demand. The manufacturing PMI slid to 47.7 from 50.6 in the previous month. The flash score was 47.8.

The downturn in Germany's manufacturing sector deepened in September with the easing of new orders and soaring energy prices. The S&P Global/BME factory PMI came in at 47.8 compared to 49.1 in the prior month. The reading was also below the flash 48.3.

Final survey data from S&P Global showed that the UK manufacturing sector shrank again in September as companies cutback production amid falling orders.

The S&P Global/Chartered Institute of Procurement & Supply manufacturing Purchasing Managers' Index posted 48.4 in September, up from 47.3 in August.

Data from the Federal Statistical Office showed Switzerland's consumer price inflation eased unexpectedly in September from a 29-year high in August.

Consumer prices rose 3.3% year-on-year in September, slower than the 3.5% increase in August. Economists had expected inflation to remain steady at 3.5%.

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