- Oil slides as OPEC said to have set higher output ceiling
- Axa bucks trend to advance on promise of higher dividends
European stocks pared declines in late trading as investors assessed valuations, after lingering disappointment with Mario Draghi’s stimulus measures and OPEC’s output target earlier sent the Stoxx Europe 600 Index toward its lowest level in more than six weeks.
The Stoxx 600 slipped 0.4 percent to a three-week low at the close of trading. A fillip from better-than-expected U.S. jobs data proved short-lived, with the index extending losses to as much as 1.2 percent after energy-related companies reversed earlier gains when oil slid. Disillusionment with the European Central Bank president’s announcement dragged the index to its biggest loss since August yesterday, contributing to a selloff that wiped about $270 billion from the value of global equities.
“There was obviously some discouragement yesterday that has carried through today,” said Ben Kumar, who helps oversee about $14 billion as an investment manager at Seven Investment Management in London. “I think that will wash out once people stop investing for the short-term central bank meetings and start looking at Europe. Oil is making the headlines because everyone was geared up for something to hang onto today -- I suspect if payrolls had come in much lower we wouldn’t be watching the OPEC decision so much.”
Optimism for a strong new round of ECB stimulus helped push the Stoxx 600 to a three-month high on Monday, taking its valuation to 16.5 times estimated earnings, compared with 17.6 for the Standard & Poor’s 500 Index. It spent the week through Wednesday hovering near this level, pushing gains from a September low to 13 percent. The index ended the week 3.4 percent lower, with a valuation multiple of about 16.
“The market overreacted to the ECB, but they’re still pumping in almost a third of a trillion euros into the economy over the next 18 months -- that’s a lot of money,” said Kumar.
In the U.S., the nonfarm payrolls report for November showed employers added more jobs than forecast, underscoring Federal Reserve Chair Janet Yellen’s confidence that the recovery is strong enough to withstand higher borrowing costs. Traders are pricing in a 74 percent chance of a December liftoff.
Oil reversed earlier gains after the Organization of Petroleum Exporting Countries was said to have set a record output ceiling of 31.5 million barrels a day. The increase from a previous target of 30 million barrels doesn’t include production from Indonesia.
Among European stocks moving on corporate news, Partners Group Holding AG led a gauge of financial-services providers lower, sliding 5 percent after three founding partners entered a derivatives transaction.
Whitbread Plc fell 2.9 percent, for the biggest loss among travel-and-leisure companies, after Barclays Plc cut its recommendation on the owner of Premier Inn hotels to equal weight, similar to hold, citing the possibility of slower revenue growth.
Axa SA rose 3.2 percent after France’s largest insurer said it will pay higher dividends to shareholders because of “robust” capital levels under new insolvency rules. Elekta AB added 3.6 percent after the Swedish maker of medical devices posted better-than-expected operating profit.