Short Respite Ends as Europe Stocks Decline After Two-Day Gain

European Stocks Retreat, Stoxx 600 Loses 0.5%
  • Commodity, energy producers rise, while most industries fall
  • Italy banks decline; JC Decaux, Mediaset drop on earnings

The optimism that lifted European equities in the past two days faded, and the shares fell the most in a week.

Raiffeisen Bank International AG sank 10 percent after saying it’s considering merging with its parent company to ease the pressure of regulatory requirements. EON SE lost 5.9 percent after posting a decline in revenue amid a slide in power prices, sending utilities to the biggest decline among industry groups.

The Stoxx Europe 600 Index lost 0.5 percent at the close of trading in London, paring a drop of as much as 0.9 percent as oil rose after an unexpected drop in U.S. crude stockpiles. The gauge advanced 1.4 percent in the past two days, rebounding from a one-month low amid easing concern over the state of the global economy and central-bank policy. Still, its rally since February has been faltering, and the gauge remains 4.6 percent below its April 20 high.

“Earnings so far have been OK but not strong enough to deliver a real upside for stock prices,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “What is still really missing from this environment is a notable rally in the banking stocks which is an important driver for any stock market rally.”

The Stoxx 600 has lost 8.5 percent this year, with banks falling the most. Since the February low, lenders rebounded less than the broader gauge and they remain down 22 percent in 2016. Italy’s Banco Popolare SC and Banca Popolare di Milano Scarl fell more than 6 percent on Wednesday, making the nation’s FTSE MIB Index the second-biggest decliner among western-European markets. Greece’s ASE Index, which is close to erasing its annual losses, fell the most.

Among other companies moving on financial results, JC Decaux SA sank 10 percent as it forecast a decline in second-quarter organic revenue growth. Mediaset SpA dropped 4.9 percent after it posted revenue that fell short of projections. Alstom SA climbed 1.4 percent as its annual profit surged after getting an Indian order for electric locomotives. Deutsche Post AG added 2.2 percent after saying that operating profit rose at the fastest rate in 13 quarters.

TUI AG slipped 1.5 percent after the tour operator said it will sell a unit offering adventure-travel activities to focus on mass-market holidays.

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