By Steve Goldstein
European stocks dropped and U.S. stock futures weakened on Thursday, as investors have largely given up on the idea that the U.S. Congress will provide new stimulus, while worrying about a recent rise in COVID-19 cases.
After a 0.6% advance on Wednesday, the Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +0.30% fell 0.7%. The aviation sector had another rough day, with Rolls-Royce /zigman2/quotes/203646520/delayed UK:RR -3.65% , International Airlines Group /zigman2/quotes/208070069/delayed UK:IAG -1.90% and Airbus /zigman2/quotes/208224336/delayed FR:AIR -0.57% retreating.
The German DAX /zigman2/quotes/210597999/delayed DX:DAX +0.36% , French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +0.19% and U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.30% each declined.
U.S. stocks had a rough Wednesday, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.88% retreating 525 points. Stock futures /zigman2/quotes/210598065/realtime DJIA +1.88% /zigman2/quotes/210598365/realtime COMP +2.05% were lower on Thursday as well. U.S. jobless claims rose by 4,000, according to the latest data from the Labor Department.
Economists at Goldman Sachs cut their U.S. growth forecast for the fourth quarter in half, to 3% from 6%. “We think it is now clear that Congress will not attach additional fiscal stimulus to the continuing resolution. This implies that after a final round of extra unemployment benefits that is currently being disbursed, any further fiscal support will likely have to wait until 2021,” the economists said. The continuing resolution is a reference to the extension of funding beyond the September-ending fiscal year, which the U.S. House has already passed.
Germany’s Ifo business climate index rose a fifth month, according to data released on Thursday that was very close to economist expectations , while U.K. Chancellor Rishi Sunak rolled out a new program to replace the expiring job furlough program, which will pay part of the cost for employees working at least one-third their previous hours.
Ajay Rajadhyaksha, a New York-based strategist for U.K. bank Barclays, told clients that “the valuation gap between growth and value equities is now at such an extreme that value stocks offer positive asymmetry on the next leg of the recovery, which should help European and other non-U.S. indices.”
Bucking the broader trend, some hard-hit financials rose. Banco Bilbao Vizcaya Argentaria /zigman2/quotes/209653399/delayed ES:BBVA +0.03% , UniCredit /zigman2/quotes/200769686/delayed IT:UCG -1.63% and NatWest Group /zigman2/quotes/209265718/delayed UK:NWG -2.41% each advanced.
Of stocks on the move, Suez shares fell 4% after its board of directors announced moves that seek to prevent a sale of its water subsidiary Suez Eau France , as part of Suez’s broader resistance to a takeover from Veolia Environnement /zigman2/quotes/200641726/delayed FR:VIE +0.90% .
Smiths Group /zigman2/quotes/208640940/delayed UK:SMIN +0.83% shares dropped 8%. The U.K. engineering group reinstated its dividend as its pretax profit from continuing operations slumped due to the planned separation of Smiths Medical as well as a new write-down. Analysts at Barclays said even though the firm didn’t provide guidance, its own estimates of a 5% organic sales decline and steady margins of 15% seem “achievable” after the results.
Pets At Home /zigman2/quotes/200736034/delayed UK:PETS -1.57% shares rose 24%, as the U.K. pet supplies retailer said underlying pretax profits would be ahead of the £73 million consensus. It said it had double-digit like-for-like sales growth through the eight weeks to Sept. 10.