European shares retreat as factory activity falters

"We're quite defensive in our sector allocation," said Joost van Leenders, senior investment strategist at Van Lanschot Kempen, warning that the impact of aggressive interest rate hikes is yet to be felt.

"The cyclicals have been much stronger than the PMIs. The risk-on rally has been sometimes out of line with the fundamental factors." Signs of easing inflation have spurred hopes that the Federal Reserve and the European Central Bank are near the end of their monetary tightening, boosting stock markets across both sides of the Atlantic in recent weeks.

The second-quarter reporting season also kicked into high gear. Analysts see an 8.1% contraction in quarterly profit for STOXX 600 companies, according to Refinitiv IBES data, a slight improvement from the 9.2% drop forecast at the start of the earnings season.

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European shares flat ahead of inflation data; Heineken dragsEuropean shares were broadly flat on Monday ahead of data that is expected to show euro zone inflation eased in July, likely supporting the view that the European Central Bank will hold off from hiking interest rates again next month.
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