European Stocks Drop to 10-Week Low as Miners Slide Before Fed

European Markets Fall Along With Energy Stocks, Oil
  • High-yield fund liquidation adds to bearishness, says trader
  • Spanish, Italian stocks worst performers in western Europe

Declines in miners and energy producers dragged European stocks lower for a fifth session, two days before the Federal Reserve’s rate decision.

Glencore Plc and ArcelorMittal slipped at least 6.3 percent, pushing a gauge of miners to its lowest level since 2009. Tullow Oil Plc and Royal Dutch Shell Plc slid at least 3.5 percent as oil also fell. Investors have turned averse to risky assets before Wednesday’s Fed decision, and traders are pricing in a 74 percent chance that officials will then announce the first rate increase since 2006.

The Stoxx Europe 600 Index fell 1.8 percent at the close of trading, wiping out early gains of as much as 1 percent to cap its longest losing streak since July. A high-yield fund liquidating its portfolio also contributed to bearish sentiment across markets, said Benno Galliker, a trader at Luzerner Kantonalbank AG in Lucerne, Switzerland.

“Nobody is ready to go in and buy and at the moment the sentiment is stay out of the commodities, oil and high-yield sector,” said Galliker. “If you have any performance left you want to secure it before the year-end. The big news is on Wednesday with the Fed hiking rates, but until then, the market will react to everything.”

Italy’s FTSE MIB Index and Spain’s IBEX 35 Index were the worst performers in western-European markets, sliding 2.1 percent or more. Germany’s DAX Index lost 1.9 percent, while the U.K.’s FTSE 100 Index fell to a three-year low. All 19 industry groups on the Stoxx 600 slid, with the benchmark gauge falling below a level that technical analysts call oversold, meaning the selloff has gone too far.

The Stoxx 600 has fallen 9.3 percent in December amid a rout in commodities, concern about U.S. monetary policy tightening and disappointment over the extent of European stimulus. It’s heading for its worst final month since 2002, defying a seasonal trend that has yielded gains in five of the past six Decembers.

Among stocks active on corporate news, National Bank of Greece SA slid 30 percent on its first day of trading after completing a share recapitalization.

Old Mutual Plc and Investec Plc, which get a majority of their revenue from southern Africa, climbed at least 1.4 percent. The rand rebounded after South Africa’s president named his second finance chief in four days, backtracking on his appointment of a relatively unknown lawmaker.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE