European Stocks Drop as May Starts With Gloom and a Flash Crash

(Bloomberg) -- European equities fell on Monday, as disappointing figures about economic activity in China and the U.S., as well as the prospect of sanctions targeting Russian oil weighed heavily on risk appetite in the first session of the month.

The Stoxx 600 Europe Index ended 1.5% lower, following a brief, sharp dive by as much as 3%. With the U.K. closed for a holiday and trading volume thin, Nordic equities led the abrupt downward moves.

The OMX Stockholm 30 Index fell as much as 8% before paring losses, with traders and fund managers pointing toward a potential portfolio trade error. “It is very clear to us that the cause of this move in the market is a very substantial transaction made by a market participant,” said David Augustsson, spokesman for Nasdaq Stockholm.

Elsewhere in Europe, carmarkers and technology led declines. Adler Group SA shares plunged as much as 46% after KPMG said it was unable to give an audit opinion and the bulk of the company's board offered resignations. Vestas Wind Systems A/S also slumped after forecasting its first loss in a decade as costs related to the wind-turbine maker's exit from Russia added to supply-chain problems.

Even though global stocks had their worst month in two years in April, the main European benchmark has emerged relatively unscathed. Still, this relative outperformance offers little consolation to investors now grappling with concerns about a sharp economic downturn and soaring inflation.

Confidence in the euro-area economy fell to the lowest in a year, and a measure of U.S. manufacturing activity unexpectedly dropped to the lowest level since 2020 as growth in orders, production and employment softened. Adding to the gloom, manufacturing and services activity readings in China plunged to their worst levels since February 2020, according to data released over the weekend.

Tipping Point Looms for Risk-Averse Equity Markets: Taking Stock

“Sell before May and go away would have been the right motto this year,” says Mathieu Racheter, head of equity strategy at Julius Baer, citing fears over global growth, the Ukraine war, and the lockdowns resulting from China's rigorous zero-Covid policy. “Overall, we recommend European investors to remain defensively positioned,” he said, naming health care, high-dividend stocks and Swiss equities.

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