- Antofagasta leads commodity shares higher after earnings
- Linde jumps after confirming merger talks with Praxair
European stocks retreated in thin trading, after briefly paring losses, as a stronger euro weighed on exporters.
Carmakers were among the biggest losers in industry groups as subdued prospects for a Federal Reserve rate increase this year weakened the dollar, sending the euro higher. Volkswagen AG slipped 1.7 percent after a report the U.S. Department of Justice was said to find evidence of criminal acts in a diesel-emissions cheating probe. Renault SA and PSA Group fell more than 2.2 percent. E.ON SE led utilities lower after UBS Group AG said the company will need to raise capital and pay a lower dividend after it spins off its Uniper unit.
The Stoxx Europe 600 Index dropped 0.8 percent at the close, its biggest fall since Aug. 2. The benchmark earlier almost erased declines after data showed a recovery in German investor confidence, before resuming a drop. The volume of Stoxx 600 shares traded was 30 percent lower than the 30-day average.
“I see limited upside,” said Soeren Steinert, an associate director for equities trading at Quoniam Asset Management, which oversees the equivalent of $29 billion. “There’s an increasingly lower probability of a Fed rate hike this year. Brexit you don’t hear about any more. And the earnings season is over. The market is being driven by cheap money from central banks, and the German 10-year yield is very low. You don’t know how long this will run.”
Investors are assessing a recent rally that helped European shares erase their post-Brexit losses and propelled U.K. and German benchmarks into bull markets. Optimism that central banks will remain supportive of growth, and some better-than-forecast corporate results drove a rebound in stocks after a slump following Britain’s vote to leave the European Union.
Still, the Stoxx 600 is struggling to stay above its 200-day moving average, a level that has proved a hurdle after past rallies. The benchmark is down 6.2 percent for the year.
Germany’s DAX Index fell 0.6 percent, after nearly erasing its annual drop yesterday. The benchmark plunged as much as 19 percent at the start of the year. Earlier today, it almost wiped out losses after an index of investor and analyst expectations rebounded, albeit less than expected, and another gauge of current conditions beat forecasts.
The U.K.’s FTSE 100 Index lost 0.7 percent. The pound strengthened after a report showed inflation accelerated in July.
Among other shares active on corporate news, Electrolux AB, which gets more than a third of its revenue from North America, lost 3.1 percent after a report showed U.S. shipments of major home appliances fell in July. Industrial-goods shares dropped, Schindler Holding AG sliding 4.4 percent after forecasting a decline in the global elevator and escalator market.
Miners bucked the trend to post the biggest gains among Stoxx 600 groups, led by Antofagasta Plc, which surged 8.7 percent after its first-half earnings rose.
German industrial-gas supplier Linde AG jumped 11 percent after saying it’s holding talks to merge with Praxair Inc., confirming media reports. The all-stock deal, which could be valued at more than $30 billion, may be reached as early as the coming weeks, people familiar with the matter said.