(Bloomberg) -- If there's one thing evident from European stock losses this week, it's that economic data matters to investors, especially if it's American.
The region's equities are still reeling from Tuesday's report showing an unexpected slump in a U.S. factory gauge, and are poised for their biggest back-to-back declines at the start of October since 2014. Just hours before that, traders had been relatively sanguine about another release that showed the worst month for euro-area manufacturing since 2012.
“The hangover from yesterday's disappointing PMI's and U.S. ISM data continues to ripple out across global markets,” said Michael Hewson, chief market analyst at CMC Markets. “The declines now appear to be accelerating on rising concern that the ongoing deterioration in the manufacturing numbers will at some point start to manifest itself in the much larger services sector.”
Stocks had rallied in September despite weakening data in the region, helped by easing trade-war tensions and a fresh round of stimulus from the European Central Bank. As recently as Monday, the Stoxx 600 closed at a 16-month high. The gauge fell as much as 1.2% on Wednesday, extending yesterday's losses, while European stock funds have bled money almost non-stop this year.
In a note published before today's decline, strategists at Barclays Plc, led by Emmanuel Cau, wrote that the decoupling of equities from macro indicators is “unsettling,” saying a pause is warranted amid geopolitical uncertainty and risks to growth. “We advise against chasing the rally.”
To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon
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