European shares hit by Daimler warning, weak economic data

(Reuters) - European shares closed lower on Thursday as a warning from German carmaker Daimler and weak economic data from major economies added to concerns about a global slowdown.

FILE PHOTO: Traders work at Frankfurt's stock exchange in Frankfurt, Germany March 14, 2019. REUTERS/Ralph Orlowski/File Photo

The pan-European STOXX 600 index .STOXX slipped 0.3%, with most sectors in the red and automakers .SXAP leading losses, down 1.4%.

Daimler DAIGn.DE dropped about 3%, the biggest decline on Germany's blue-chip index .GDAXI after the carmaker said tougher emissions rules would hit earnings in 2020 and 2021. It said it was cutting staff costs at its Mercedes-Benz business to seek more than 1 billion euros ($1.1 billion) in savings.

“It’s been well known that the shift to electric will be a difficult one and there is a no real timeline on when the companies will start seeing a turnaround,” said Ken Odeluga, market analyst at City Index in London.

Subdued global auto sales have hit German carmakers with weakness in China - the biggest market - casting a pall, while a new emissions-testing regime added to the sector’s pains.

To add to the dour mood, Germany, Europe’s biggest economy, narrowly avoided slipping into recession in the third quarter, while growth indicators from China and Japan remained weak, stoking fears of a global slowdown.

The gloom took European shares further away from a four-year peak hit last week driven by optimism about the chances of a ‘phase one’ trade deal between the United States and China and some better-than-expected earnings.

“The initial optimism that we were seeing for the first phase to be completed seems to be a bit overoptimistic now as there seem to be some stumbling blocks,” said Michael Baker, analyst at ETX Capital.

Defensive plays like utilities .SX6P, healthcare .SXDP and telecoms .SXDP, which investors had taken refuge in earlier in the week when trade uncertainties hit risk appetite, started to wear out. All were down between 0.3% and 1%.

London's FTSE 100 .FTSE slid 0.8% as a 6% drop in private equity company 3i III.L and a handful of stocks trading ex-dividend overshadowed an earnings-driven jump in luxury brand Burberry BRBY.L which climbed 3%. [.L]

STOXX 600's biggest gainer was genetic testing company Qiagen QIA.DE, up 14% after Bloomberg reported scientific instruments maker Thermo Fisher Scientific TMO.N had approached the company about a potential deal.

Reporting by Agamoni Ghosh, Sruthi Shankar and Susan Mathew in Bengaluru; Editing by Bernard Orr and Susan Fenton