More Losses for Europe Stocks as Banks Fall, Earnings Disappoint

Europe's Stoxx 600 at Lowest Level Since 2012
  • Royal KPN, Novo Nordisk slide after results, LVMH gains
  • Stoxx 600 extends drop after U.S. services data miss forecasts

Declines in banks dragged European stocks lower for a third day, while investors weighed financial results amid concern over global growth.

Novo Nordisk A/S slid 7.6 percent and Royal KPN NV lost 1.2 percent after they reported worse-than-estimated earnings. A gauge of lenders posted the worst performance in the Stoxx Europe 600 Index, extending its lowest level since 2012. The regional benchmark deepened a drop after U.S. services data missed estimates, stoking concern about a recovery in the world’s biggest economy.

The Stoxx 600 fell 1.5 percent at the close of trading, capping its longest losing streak in two weeks. It briefly inched into positive territory on at least three occasions today, but failed to sustain gains.

Anxiety about global growth has resurfaced, after a two-week halt to the market selloff sparked by China’s slowdown and an oil rout. While central-bank optimism tempered losses toward the end of last month, the benchmark still had its worst start to a year since the financial crisis.

“The extent of the correction is unjustified in a world where economic conditions haven’t drastically changed,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “Sentiment is still below freezing. But fundamentals look pretty solid if you look under the hood. We’ve added to our equity positions and will be looking at earnings to trigger a shift.”

The bar for earnings expectations is getting lower, with analyst cuts to estimates outpacing upgrades by the most since October, according to a Citigroup Inc. index tracking the changes.

Risk in credit markets also increased. The Markit iTraxx Europe Index of credit-default swaps on investment-grade companies surpassed 100 basis points for the first time since October 2013.

Italian lenders led declines among European peers, with Banco Popolare SC and Banca Popolare di Milano Scarl tumbling more than 5.7 percent amid concern over their piles of bad debt.

Among other stocks active on financial results,  Fortum Oyj slid 13 percent after its quarterly comparable operating profit missed projections.

LVMH gained 4.5 percent as its fashion and leather-goods sales beat forecasts, while Christian Dior SE rallied 5.1 percent.

Syngenta AG climbed 2.7 percent after China National Chemical Corp. agreed to buy the maker of pesticides for more than $43 billion.

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