- Carmakers rebound from Friday’s drop with Volkswagen leading
- Oil stocks rise amid speculation of talks to stabilize prices
European shares were little changed, with Germany’s DAX Index close to erasing its annual drop, as investors assessed recent gains in light of the outlook for earnings and economic growth.
Rebounding automakers posted the best performance of the Stoxx Europe 600 Index’s 19 industry groups. Volkswagen AG’s 1.4 percent advance buoyed the DAX, which entered a bull market last week, to within 0.1 percent of recouping its 2016 losses. BP Plc led oil stocks higher as crude extended its advance above $45 a barrel amid speculation that producers will revive talks to stabilize prices. Glencore Plc dragged commodity producers lower.
The Stoxx 600 slipped less than 0.1 percent to 346.05 at the close of trading, after earlier rising as much as 0.4 percent. The volume of shares trading hands today was about 60 percent lower than the 30-day average, with some markets, including Italy’s, closed for a holiday.
“I haven’t seen any evidence of profit growth picking up -- it’s about the chase of yield ultimately,” said Michael Hewson, a market analyst at CMC Markets in London. “Now that the Bank of England has joined the European Central Bank in pushing rates lower, stocks will become that much more attractive, whether or not you think they’re overvalued.”
As central banks keep monetary policy accommodative to spur economic growth, bond yields have fallen and in some countries, including Germany, are now below zero. In comparison, the dividend yield for Stoxx 600 companies is about 3.6 percent.
Investors have also been watching economic figures for indications of the region’s health. Recent data have topped projections, with reports last week showing euro-area gross domestic product grew 0.3 percent in the second quarter, as forecast, while Germany’s economy expanded 0.4 percent, twice as fast as estimated.
Still, skepticism about growth prospects and the efficacy of central-bank stimulus has sent the Stoxx 600 down 5.4 percent in 2016. Economists have lowered their euro-area growth forecasts for this year and next, and analysts, who in January saw higher profits at Stoxx 600 companies, now project a 4.1 percent contraction.
“If you take Germany out of the equation, it’s been disappointing in France, Italy and Spain and at the moment we don’t know how the third quarter is going to offset any of the slowdown in the previous quarter,” said Hewson, referring to economic growth.
At least by one measure, European stocks are having a worse year than even at the height of the global financial crisis -- investors withdrew money from the asset class for a 27th consecutive week, a record losing streak, according to Bank of America Merrill Lynch, citing EPFR data going back to 2002.
Among stocks moving on corporate news today, Hennes & Mauritz AB advanced 2.1 percent after reporting a better-than-expected 10 percent increase in July sales. UCB SA jumped 8.9 percent after the Belgian drugmaker won a U.S. court ruling in a bid to block generic competition to one of its best-selling medicines.