- Stoxx 600 halts rally after climbing to highest since Jan. 6
- Volatility on ECB days has been rising in recent decisions
European equities slid for the first time in four days as traders remained unconvinced by Mario Draghi’s stimulus program, while he urged critics to give it time to work.
The Stoxx Europe 600 Index slid 0.3 percent at the close of trading, trimming losses of as much as 1.1 percent. The European Central Bank kept its interest rates unchanged, as predicted by economists, and President Draghi said he’s ready to step up stimulus if the outlook worsens. He said inflation will remain low, though it should pick up in the second half of the year. The region’s lenders rose for a fourth day to close at a one-month high.
“The market hasn’t yet accepted the frequently repeated word ‘patience,’” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “The fact that previous measures haven’t had the desired effect left little room for surprises. Only better GDP numbers would be able to support the measures.”
ECB days have led to more volatility lately, with the Euro Stoxx 50 Index of the biggest euro-area companies averaging intraday swings of 4.1 percent after the past four meetings, or about double that for all meetings since 2010. The gauge closed the day lower in two of the past three instances.
While the recent rally has lifted the Stoxx 600 by 15 percent since its February low, investors remain skeptical about the efficacy of central-bank stimulus. Analysts have also slashed profit estimates for the year, and now project a decline.
“Negative rates are clearly hated by the financial assets,” Anastasia Amoroso, a New York-based global market strategist at JPMorgan Asset Management, told Bloomberg TV before Draghi’s press conference. “I don’t think negative rates can do the trick by itself. There are more tools in the ECB’s tool case.”
Earnings news also moved stocks on Thursday. Ericsson AB tumbled 15 percent after quarterly revenue missed analysts’ estimates as phone operators continued to curb network investments. Pernod Ricard SA declined 4.9 percent after sales in China dropped. Dassault Systemes SA lost 4.2 percent after revenue fell short of projections. Sky Plc slid 4.2 percent after reporting rising customer attrition rates across Europe.
Swatch Group AG lost 3 percent after a report showed Swiss watch exports posted the biggest quarterly drop since 2009. German advertising firm Stroeer SE tumbled 18 percent, the most ever, after short seller Carson Block said Muddy Waters Capital LLC is betting against the stock.
Among advancing shares, Schneider Electric SE climbed 4.7 percent after its first-quarter revenue beat estimates. Atos SE jumped 6 percent after reporting an increase in organic sales.
Volkswagen AG gained 5.1 percent after saying it has reached a deal with U.S. authorities over its emissions rigging scandal. Smiths Group Plc added 4 percent after agreeing to buy the explosives-detection arm of jet-engine maker Safran SA, which rose 1.5 percent. Darty Plc jumped a record 23 percent after Steinhoff International Holdings NV raised its offer for the French electronics retailer a third time in less than 24 hours in a contest with Groupe Fnac SA. Fnac slid 1.8 percent.