(Reuters) -European stocks slumped to their lowest in two months on Friday, as warnings from companies and factory activity data highlighted the economic headwinds from supply-chain constraints and elevated prices.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 29, 2021. REUTERS/Staff

The Europe-wide STOXX 600 index fell 1.1% in a dour start to October, which has traditionally been a rough month for equities, with banks and automakers leading broad declines.

British pub operator Wetherspoon dropped 1.2% after it said it faced difficulties attracting workers and posted a near doubling of annual losses.

Online electricals retailer AO World Plc tumbled 17.8% on saying a shortage of delivery drivers in the UK and other disruptions in the global supply chain hit its revenue growth in the first half of the year.

Meanwhile, a survey showed euro zone manufacturing growth remained strong in September but activity took a big hit from supply chain bottlenecks that are likely to persist and keep inflationary pressures high.

Underwhelming figures from Asian factories and overnight losses on Wall Street dented the global mood as investors awaited a report that is expected to show euro zone inflation surged to a 13-year high. [GVD/EUR]

With government bond yields surging to multi-month highs and concerns about inflation coming to the fore, the benchmark STOXX 600 closed September 3.4% lower in its worst monthly showing in almost a year.

“For equities, this combination of slowing growth – albeit at a high level of demand – rising inflation and higher bond yields has meant slightly higher volatility, lower market returns and a rotation beneath the surface,” Goldman Sachs strategist Sharon Bell said in a note.

“It hasn’t helped that earnings revisions have also started to slow from their frenetic pace earlier in the year.”

BMW AG inched up 0.3% after lifting its annual profit margin forecast as higher prices for new and used vehicles outweighed the effect of supply-chain issues.

Daimler fell 1% even after it said shareholders voted to spin off its trucking unit and publicly list it by the end of 2021.

French state-owned utility EDF and energy group Engie rose 3.5% and 1.2%, respectively, with traders pointing to relief that electricity tariffs were untouched by the government in its plan to check further price rises.

Utilities were among the lone gainers, while other defensive sectors including real estate and food & beverages posted small losses.

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