European markets slump as investors lock in gains after winning streak

European stocks fell on Monday as investors were quick to lock in their gains after a four day winning streak for stock markets, whilst weaker than expected US Chicago business activity and US personal spending data also kept investors on the back foot.

The FTSE 100 quickly traded in negative territory within the first hour of trading and there it remained for the rest of the session, with equity falls building throughout the session, leaving the UK Index down over 0.5% going into the close. Today’s fall is not a huge surprise given it comes on the back of a four-day gaining streak for the FTSE 100 and the FTSE has only managed to rally five consecutive days once since the start of June last year.

Most of the profit taking we have seen today has been focused on financial stocks and miners, with both FTSE 350 banking and mining sectors losing around 1% on the day, and this has been a key weight on the FTSE’s performance today.

It’s an intensive week ahead for economic data and company earnings, and so naturally there has been some positioning today ahead of US jobs figures and the ECB rate decision later in the week.

Data this morning confirmed that Spain, as expected, re-entered what is expected to be a long recession, with GDP contracting -0.3% in the first quarter of the year, slightly better than the -0.4% expected. Nevertheless, there remain significant concerns about the drag on eurozone coming from Spain and the second round effects from deeper debt contagion.

Data out of the US in the afternoon session did disappoint somewhat, with Personal Spending data coming in at +0.3% against expectations of 0.4%, though the prior months rise of +0.8% was upwardly revised to +0.9%. However, when taking into account inflation, spending barely rose on the month, whilst at the same time, Personal Income came in at +0.4%, slightly higher than expected, which raises concerns that Americans are hoarding cash and not spending at a crucial time in the US economic recovery.

Chicago Purchasing Management Index (PMI) data also badly disappointed, coming in at 56.2 against expectations of 60.8, marking a much sharper fall than expected in business activity. Today’s data perhaps indicates that the US economic recovery is losing a bit of steam and therefore keeps trader sensitivities high ahead of Fridays non farm payrolls release.

Aberdeen Asset Management was the top stock gainer in London trade after the firm reported a 14% rise in underlying pretax profit to £162.2m for the first half of the year, which beat most expectations of £153m. Net inflows of £2.4bn for the first three months of the year left assets under management of £184.7bn, which is a rise of 9% from six months ago. Aberdeen Asset Management shares rose over 3% on the day to close above 280p to hit a new 10-year closing high.