Europe Stocks Snap Three-Day Winning Streak as All Await Yellen

European Shares Fall
  • Pharmaceutical shares drop after Clinton comments on pricing
  • Traders pricing in 56% chance of U.S. rate hike this year

European shares posted their biggest drop in more than three weeks as a disappointing German sentiment report highlighted lingering concern about global growth before Federal Reserve Chair Janet Yellen’s Friday address in Jackson Hole, Wyoming.

The Stoxx Europe 600 Index slid 0.8 percent to 342.02 at the close of trading, with all industry groups retreating. Germany’s DAX Index fell 0.9 percent, for one of the biggest declines among major western-European markets, as data from the Ifo institute showed business sentiment in the region’s largest economy unexpectedly weakened in August. A drop in drugmakers dragged the Swiss Market Index down 0.7 percent, while Italy’s FTSE MIB Index lost 1.1 percent as banks resumed a slide.

“Ifo is influencing markets today, but all eyes are on Yellen,” said Ralf Zimmerman, an equity strategist at Bankhaus Lampe in Dusseldorf, Germany. “Investors won’t position too aggressively ahead of the Yellen speech.”

Investors are seeking clues on the trajectory of U.S. interest rates, with Yellen’s upcoming address looked to for some clarity after recent hawkish comments from Fed officials. Fed funds futures indicate a 56 percent chance of a U.S. interest-rate hike this year, up from 36 percent at the start of August.

The rally that lifted the Stoxx 600 as much as 12 percent since the Brexit vote stumbled last week on growing concerns over the European Central Bank’s ability to spur growth amid political turmoil and a banking crisis in Italy. A Bank of America Corp. report showed investors withdrew money from the region’s equity funds for a record 28 straight weeks.

While recent economic data have beaten forecasts, and the Stoxx 600 rose 1.4 percent this week through Wednesday, today’s worse-than-forecast reading on German confidence indicates that companies remain cautious about prospects after Britain’s decision to leave the European Union.

Automakers were among the biggest decliners on the Stoxx 600 as the euro strengthened for the first time in five days, making exports more expensive. European pharmaceutical shares slid as comments from Democratic presidential candidate Hillary Clinton revived concerns about potential drug pricing changes. Glencore Plc and Anglo American Plc led a gauge of miners to one of the worst performances among industries as iron ore retreated. 

Among stocks moving on corporate news today: 

  • Entertainment One Ltd. plunged 14 percent after U.K. broadcaster ITV Plc withdrew its 1 billion-pound ($1.3 billion) offer for the owner of the children’s television franchise “Peppa Pig.”
  • Playtech Plc rose 3.2 percent after the gambling-software provider reported an increase in first-half revenue and announced a special dividend. 
  • Jimmy Choo Plc added 5.3 percent after the maker of luxury shoes posted higher first-half revenue and earnings and said it remains optimistic on this year’s prospects.
  • CRH Plc rose 2.9 percent after the Irish construction company posted higher-than-expected first-half sales and profit.
Before it's here, it's on the Bloomberg Terminal. LEARN MORE