Europe Stocks Snap Three Days of Gains Amid Rate Rise Concern

  • Stoxx 600 extends losses after U.S. jobless-claims report
  • EON slides after canceling plan to spin off nuclear plants

European shares fell for the first time this week amid renewed investor concern that the global economy isn’t strong enough to withstand higher U.S. interest rates.

The Stoxx Europe 600 Index slipped 1.2 percent to 359.34 at the close of trading, snapping the longest streak of gains since before China devalued its currency last month. The benchmark gauge extended declines after a report on U.S. jobless claims signaled resilience in the country’s labor market, bolstering the case for the Federal Reserve to raise rates this month.

A measure of stock volatility rose 5.1 percent, halting a two-day drop. Shares rallied yesterday as optimism grew that China’s market turmoil can be contained and Japan’s prime minister pledged to lower corporate taxes.

“We’ve stopped most of the panic about China collapsing and the world falling apart,” said Ben Kumar, a fund manager who helps oversee about $14 billion at Seven Investment Management in London. “The next question we have to deal with is: is global growth strong enough to deal with a Fed rate rise?”

Fed officials must weigh whether market turmoil that began last month will offset the labor-market improvement and delay plans to raise the benchmark interest rate for the first time since 2006. Odds that the central bank will act at its Sept. 16-17 meeting are steady at 28 percent this week, according to Fed funds futures tracked by Bloomberg.

A measure of commodity producers posted the biggest decline of the 19 industry groups on the Stoxx 600, with BHP Billiton Ltd. and Glencore Plc contributing the most to the drop.

Banco Santander SA, which generated about 28 percent of its revenue in Brazil in 2014, fell 3.3 percent to its lowest price in more than two years, after Standard & Poor’s cut the Latin American nation’s credit rating to junk.

Among shares moving on corporate news, EON SE dropped 7.6 percent to its lowest price since at least 1992 after canceling plans to spin off its German nuclear plants. 

Wm Morrison Supermarkets Plc slid 2.8 percent after Chief Executive Officer David Potts warned the company faces a long road to repair profitability. Tesco Plc retreated 3 percent and J Sainsbury Plc retreated 1.9 percent as Morrison’s pledged to keep cutting prices.

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