European Stocks Post Worst Start to a Year as China Rout Spreads

China Stock Selloff Tests New Market Circuit Breakers
  • German shares decline the most among western-European markets
  • Stoxx 600 miners, automakers fall more than 3.5 percent

European stocks fell after a rout in Chinese equities rekindled concern that the nation’s economic slowdown will hamper the global recovery, while tension between Saudi Arabia and Iran added to bearish sentiment.

Automakers declined the most in the Stoxx Europe 600 Index, which lost 2.5 percent for its worst start to a year ever. Germany’s DAX Index, among the best performers in 2015, dropped 4.3 percent, the biggest slide for the export-driven gauge since the China-led rout in August. A measure of shares from the Asian nation tumbled 7 percent, triggering circuit breakers that halted trading for the rest of the day, after manufacturing data showed a fifth month of contraction.

The rout follows a fourth year of advances for European shares, which beat global equities and the Standard & Poor’s 500 Index. Yet gains were anything but smooth: the European measure slipped from a record in April, as concerns over China’s economy took over. A Morgan Stanley index of top European stocks with the highest revenue exposure to the Asian nation tumbled the most since 2011 last year.

“I’ve just returned to the office today and this is definitely not a nice welcome,” said Daniel Murray, London-based head of research at EFG Asset Management. “Two things have combined to create a really strong negative sentiment today: the end of last year was unusually weak, and markets in China have been terrible overnight.” 

The Stoxx 600, which was up as much as 21 percent for the year in April, ended 2015 with a 6.8 percent gain. The gauge ended with its worst December since 2002, even as investors, options traders and strategists all remained bullish amid European Central Bank stimulus. They’re sending money to funds tracking the region’s shares and paying the least in a year to hedge against losses as estimates call for a 13 percent Stoxx 600 jump in 2016.

The DAX tumbled 4.3 percent, led by losses in utilities and automakers, after data showed Germany’s inflation unexpectedly slowed and power prices fell.

Daimler AG lost 5.1 percent after its chief financial officer told Boerse-Online it won’t spin off its commercial-vehicles unit. Continental AG declined 4.1 percent after a report that the tiremaker’s chief executive officer said it may lose sales because of last year’s emissions scandal at its customer Volkswagen AG. Fiat Chrysler Automobiles NV dropped 4.9 percent as it distributed its remaining 80 percent stake in Ferrari NV, which had been generating fat profits.

Shire Plc dropped 5.2 percent as people familiar with the matter said the drugmaker is in advanced talks to acquire Baxalta Inc. for about $32 billion.

While commodity producers fell, Randgold Resources Ltd. bucked the trend, rising 2.4 percent as gold was set for its biggest rally in two weeks.

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