Banks’ Rebound Fails to Boost Europe Stocks Near Three-Week Low

Bank Stocks Rebound in European Trading
  • HSBC climbs most since April and ING most since February
  • Fiat Chrysler jumps in Milan trading after Samsung deal news

European equities hovered near a three-week low as skepticism about the region’s growth overshadowed a rebound in banks.

The Stoxx Europe 600 Index added less than 0.1 percent, after jumping as much as 0.4 percent and falling 0.4 percent, with trading of companies on the gauge about 20 percent lower than the 30-day average. While lenders such as HSBC Holdings Plc and ING Groep NV rallied after giving financial results, most companies in the Stoxx 600 declined.

The recovery in European stocks has lost steam as concerns about the strength of the economy amid falling oil prices and bank profitability resurfaced. After the biggest monthly surge since October, sinking lenders dragged the Stoxx 600 down 1.9 percent in the past two days, the most in almost a month.

“We’ve seen some weakness in banks in the past couple of days as investors didn’t really buy the results of the stress tests, but today there’s some easing of the headwinds after some results came in better than expected,” said Christoph Riniker, the Zurich-based head of strategy research at Julius Baer Group Ltd. “There’s still too much uncertainty in Europe for there to be sustained gains. You have the banking issues, Brexit is weighing on sentiment, there’s questions about economic growth, so we will continue to see a volatility.”

The benchmark gauge has lost 8.3 percent this year and remains lower than its level from before the U.K. referendum on European Union membership, while U.S. and Asian equities have already recovered. Banks, hurt by worries about profitability amid record-low interest rates and weak economic growth as well as non-performing loans in Italy, suffered the most, falling 30 percent in 2016.

In recent weeks, though, economic figures have been beating forecasts. On Wednesday, data showed the euro-area services and manufacturing industry in July unexpectedly accelerated to the highest in six months, signaling that businesses are shrugging off Brexit worries. Still, analysts expect Stoxx 600 companies to post a 3.6 percent decline in earnings this year, compared with expectations for a 5.7 percent increase at the start of the year.

Among major stocks moving on financial updates:

  • HSBC Holdings Plc rallied 4.5 percent after announcing it will buy back $2.5 billion of its own shares. 
  • ING Groep NV jumped 8.2 percent as the biggest Dutch lender said second-quarter profit more than tripled.
  • Standard Chartered Plc added 4.2 percent as first-half loan impairment charges fell by a third.
  • Societe Generale SA climbed 3.2 percent after posting earnings that topped analyst projections. 
  • Aggreko Plc slumped 13 percent after the Scottish engineer reported a decline in revenue and profit. 
  • GAM Holding AG sank 13 percent as the Swiss asset manager said first-half earnings fell as clients withdrew money.
  • German publisher Axel Springer SE fell 3.4 percent after posting sales that missed estimates.

Fiat Chrysler Automobiles NV jumped 8.3 percent after people familiar with the matter said Samsung Electronics Co. is in advanced talks to buy some or all of the operations of auto-parts maker Magneti Marelli from the Italian carmaker.

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