European Stocks Lower; DWS Slumps On ESG Claims

European stock markets weakened Thursday, hurt by deteriorating German economic confidence as Covid cases continue to rise ahead of a key meeting of policymakers from the Federal Reserve and other central banks.

At 4 AM ET (0800 GMT), the DAX in Germany traded 0.4% lower, the CAC 40 in France fell 0.3% and the U.K.’s FTSE 100 dropped 0.4%.

The September German GfK consumer climate index dropped to -1.2 earlier Thursday, falling from a revised -0.4 for August, indicating that sentiment is weakening in Europe’s main growth driver. 

On Wednesday, the Ifo Institute’s influential business climate index fell for the second month in a row, with German manufacturers complaining about supply bottlenecks as well as fretting about rising Covid infection numbers. New infections hit a three-month high in Europe's biggest market, according to data released on Wednesday.

Business confidence is on the way down in the U.K. too: a quarterly labor market survey by the Confederation of British Industry showed more companies complaining about labor shortages than ever before. 

Adding to the sense of gloom was news that the European Union could reimpose restrictions on visitors from the U.S. on Thursday, a move that would weigh heavily on the region’s travel and leisure sector. The EU is upset that the U.S. hasn't reciprocated after Europe loosened restrictions on visiting U.S. tourists earlier in the summer.

European markets received a negative handover from Asia, after South Korea became the first major Asian economy to lift interest rates since the pandemic started. 

That said, investors remained focused on the start of the Jackson Hole symposium later this session. Fed Chair Jerome Powell is due to speak on Friday, and what he potentially says about tapering the central bank's bond-buying program could determine market sentiment for weeks to come.

In corporate news, DWS Group (DE:DWSG) stock fell 9.4%, retreating from an all-time high, after the Wall Street Journal reported Wednesday that U.S. authorities are investigating Deutsche Bank 's  (DE:DBKGn) asset management arm over claims it overstated how much it used sustainable investing criteria to manage its assets. 

Staying in the sector, Barclays (LON:BARC) fell 0.4% after the British lender announced Thursday that it will invest more than 30 billion rupees ($400 million) in its India unit to expand its operations in the country.

Elsewhere, oil prices fell Thursday, correcting after the biggest three-day gain since March, with mounting Covid-19 cases, fuelled by the highly transmissible delta variant, continuing to threaten the global demand recovery in the second half of the year.

That said, the picture in the U.S. looks more promising. Crude inventories in the largest consumer in the world fell last week for a third consecutive week while overall fuel demand increased to the most since March 2020, the Energy Information Administration said Wednesday.

By 4 AM ET, U.S. crude futures traded 1.4% lower at $67.42 a barrel, while the Brent contract fell 1.3% to $70.37. Both contracts have risen by around 10% over the last three days.

Additionally, gold futures fell 0.2% to $1,787.35/oz, while EUR/USD traded 0.1% lower at 1.1769.

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