BHP, Standard Chartered Drag Europe Stocks From Three-Week High

Stoxx Europe 600 Finishes Down for Session
  • Miners retreat after reaching their highest levels ince Dec. 3
  • LSE, Deutsche Boerse surge with Euronext, BME amid M&A news

A retreat in miners, led by BHP Billiton Ltd. after it cut its dividend, sent European stocks lower for the second time in three days.

A 6.1 percent drop in BHP dragged down a gauge tracking commodity producers, after Monday’s surge to the highest level since Dec. 3. Standard Chartered Plc fell 6.7 percent after posting a surprise annual loss, while Hugo Boss AG tumbled 20 percent after forecasting a profit drop this year. Deal activity lifted shares of stock exchanges.

The Stoxx Europe 600 Index dropped 1.2 percent at the close. After briefly erasing losses earlier today, it deepened losses in afternoon trading, tracking oil lower. The equity gauge has been particularly volatile this year on concern over China’s slowdown, disappointing earnings results and dissipating faith in central-bank support. It hasn’t posted two consecutive days of gains since December.

“Earnings have been mixed,” said Pierre Mouton, who manages about $9 billion at Notz, Stucki & Cie. in Geneva. “I’m still concerned about cyclicals because the global picture hasn’t changed. It has become normal to expect something from Central Banks, but they’re running out of ammunition, and they will end up putting their credibility at risk.”

Economic data in Europe have been missing estimates, and a report on Tuesday showed German business confidence fell for a third month. The nation’s DAX Index was among the biggest losers in the region, as slides in as E.ON SE and RWE AG took it down 1.6 percent.

The Stoxx 600 recouped as much as 9.3 percent since falling to a two-year low earlier this month, buoyed by gains in miners. The rebound took its valuation to 14.3 times estimated earnings, up from 13.2, though it’s still well below the 16.7 reached at the April peak.

Miners, the only industry group to post gains in 2016, fell today after surging 35 percent from a January low through Monday. The relative strength index of Stoxx 600 commodity producers rose above 67 yesterday, approaching what technical analysts call overbought levels.

Auto-related companies were among the worst performers, led by a 6.5 percent drop in GKN Plc after the maker of car components reported profit that missed projections.

Some stocks bucked the trend to advance on corporate news. InterContinental Hotels Group Plc gained 3.5 percent after announcing a special dividend of $1.5 billion. Thales SA climbed 6.3 percent after the maker of missile-guidance systems raised its sales forecast.

London Stock Exchange Group Plc surged 14 percent and Deutsche Boerse AG gained 3.2 percent after saying they’re in merger talks. Bolsas y Mercados Espanoles SA and Euronext NV also added 2.5 percent or more.

Meggitt Plc rallied 11 percent after its chief executive officer said the U.K. supplier of aircraft wheels and brakes would be receptive to takeover interest if the bid was high enough.

Banks reversed earlier gains, falling 2 percent as a group. Lenders are among the most battered in the Stoxx 600 this year amid concern over bad loans at Italian firms, disappointing earnings and questions over Deutsche Bank AG’s creditworthiness. The selloff has been overdone, as shares are pricing in a too-high chance of a crisis or economic recession, Credit Suisse Group AG strategists wrotein a note.

“Short term, low oil and commodity prices tend to exacerbate fears of defaults in the resource sector overall,” Mouton said. “Hence pressure on banks, and finally pressure on markets.”

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