By Sruthi Shankar
(Reuters) -European stocks dipped on Monday, following a five-week winning streak, as a surprise U.S. credit rating downgrade and weak economic data from China weighed on investor sentiment.
The pan-European STOXX 600 index fell 0.7% by 0913 GMT, retreating from seven-week highs touched on Friday.
U.S. stock index futures fell more than 1% and longer-dated U.S. Treasury yields rose after credit rating agency Moody’s cut its ratings on the country’s debt on Friday, citing concerns about the nation’s growing $36 trillion debt pile.
U.S. President Donald Trump’s sweeping tax-cut bill, which had been stalled for days by Republican infighting over spending cuts, won approval from a key congressional committee on Sunday, further adding to worries over U.S. fiscal outlook.
The unease was reflected in markets across the globe, with Asian and European stocks falling and safe-haven gold climbing. [MKTS/GLOB]
“Given the pledge by Trump to cut taxes, it’s feared the situation could deteriorate further,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“The implications of Trump’s erratic policymaking are causing caution to creep back in, dampening down the enthusiasm of recent weeks.”
De-escalation in U.S.-China tariff war and hopes of interest rate cuts from the European Central Bank have helped regional markets recover from the early April slump when Trump annnounced hefty tariffs on its trading partners.
The STOXX 600 remains less than 4% below its all-time highs.
Meanwhile, the European Union and Britain reached a tentative agreement on defence and security, fisheries and youth mobility ahead of a EU-UK summit on Monday, paving the way for British firms to participate in large EU defence contracts, EU officials said.
Britain is poised to agree the most significant reset of ties with the European Union since Brexit, seeking closer collaboration on trade and defence to help grow the economy and boost security on the continent.
Luxury stocks declined after China’s retail sales data for April missed expectations. Hermes, Burberry and Moncler each dropped about 2% as European luxury firms count on China as a big market for their products.
Shares of BNP Paribas rose 1.7% after the French bank announced a share buyback plan worth 1.08 billion euros ($1.21 billion).
Volkswagen fell 3.5% as the German automaker traded ex-dividend.
Ryanair rose 3.1% after the Irish low-cost carrier reported strong demand across Europe and projected that fares would rebound and recover much of the decline that dented profit last year.
Other airline stocks including Wizz Air and EasyJet rose 2% and 0.7%, respectively.
($1 = 0.8921 euros)
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Tasim Zahid)
