Losses in European stocks worsened after Federal Reserve Bank of St. Louis President James Bullard said that the U.S. central bank should raise interest rates.
Bullard’s comments came in a day that started in the red for the region’s equities amid disappointing earnings announcements, putting into question whether the global economy is strong enough to withstand higher rates. The Stoxx Europe 600 Index inched lower in the final hours of trading, closing down 1.6 percent. The gauge briefly reversed its slide in the morning, after European Central Bank President Mario Draghi said risks to the economy are visible, spurring speculation that he will add to stimulus measures.
“Mario Draghi signaled he will extend the QE program beyond this year, but on the other hand people recognized, if QE is necessary then there could be something wrong with the European economy,’’ said Soeren Steinert, associate director for equities trading at Quoniam Asset Management in Frankfurt. His firm manages more than 25 billion euros ($27 billion). “If there’s nothing new, there’s really no reason to buy. At the same time, overall earnings have been on the disappointing side.’’
The benchmark gauge of Europe’s equities is falling after it rallied 0.7 percent on Wednesday, the most in two weeks, amid deal activity and earnings reports. It rebounded 12 percent from its September low through yesterday as Draghi said last month the ECB will consider more stimulus in December. The equity measure closed 8.5 percent below its April record.
Today, energy producers and miners fell the most among Stoxx 600 industry groups, with the rout in commodities resuming.
Repsol SA lost 7.3 percent after it reported profit that missed analyst projections. RWE AG dropped 9.6 percent as Germany’s largest power producer posted a decline in nine-month earnings. Aegon NV retreated 11 percent as the Dutch insurer had a quarterly loss. Rolls-Royce Holdings Plc slumped 20 percent, the most since 2000, after saying next year’s earnings will suffer a 650 million-pound ($990 million) hit from declining demand for business-jet engines and lucrative maintenance services on bigger turbines.
Some companies advanced after reporting financial results. Merck KGaA climbed 1.5 percent as it raised its annual profit forecast after quarterly earnings at Germany’s second-largest pharmaceutical beat analysts’ estimates. Siemens AG added 1.9 percent after raising its dividend and announcing a share buyback program. Iliad SA gained 2.7 percent after the telecommunication company said the number of mobile subscribers increased. BAE Systems Plc advanced 3.8 percent after saying it’s cutting jobs tied to the Eurofighter-Typhoon and reducing output of the fighter jet.