European shares flat, ends volatile September with losses

By Sruthi Shankar and Shreyashi Sanyal

(Reuters) -European stocks ended flat on Thursday as declines in travel and leisure limited gains in miners, while ending the month with falls of over 3% on worries about a slowing global economy and higher inflation.

The pan-regional STOXX 600 index was 0.05% lower, with miners rising 2.0% and travel stocks falling 2.2%.

The European stocks benchmark ended September with losses of 3.4% after a seven-month winning streak, as a surge in government bond yields drove investors out of high-growth sectors such as technology into economically sensitive banking and energy stocks.

"Recent market moves suggest that a rotation is under way in favour of sectors and assets that benefit from a consumption shift from goods towards services," BCA analysts said in a note.

"Given that we do not expect rising interest rates to have a damaging impact on the real economy over the coming 12-18 months, we recommend that investors maintain a moderate overweight allocation to stocks."

A growing number of risks including hawkish stance from the U.S. Federal Reserve, supply-chain constraints and Chinese property developer Evergrande's financial troubles have weighed on sentiment this month, even as investors bet on a steady European economy.

Defensives-heavy Swiss market is among the biggest decliners this month, while banking-heavy Spanish and British indexes remained buoyant.

Among individual stocks, Sweden's H&M was 3.4% lower after the retailer said supply disruptions hit sales in September.

Spirits maker Diageo Plc gained 1.2%, hitting a record high after it forecast a boost to operating margins as people opt for premium brands.

"The company (Diageo) did say that cost pressures were rising, but that for the moment they were manageable, helping to push the shares to a new record high. That must be worth raising a glass to," said Michael Hewson, chief market analyst at CMC Markets UK.

Swedish cloud communication services provider Sinch rose 3.1% after saying it had agreed to buy cloud-based email delivery platform Pathwire in a deal worth about $1.9 billion.

British online fashion retailer Boohoo tumbled 15.1% as it warned that freight inflation and higher wages for its distribution centre workers would impact full-year profit margins.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu and Arun Koyyur, William Maclean)