- Odds of a Fed rate increase in September stand at about 22%
- Energy stocks retreat even as crude reverses earlier declines
European stocks were little changed as investors speculated on the direction of Federal Reserve monetary policy at its meeting this week.
The Stoxx Europe 600 Index fell 0.1 percent to 341.01 at the close of trading, erasing earlier gains of as much as 0.4 percent. The Fed’s policy decision is in focus for indications of the health of the world’s biggest economy and the likely trajectory of interest rates. Economists and investors expect the central bank to keep borrowing costs unchanged. December is the earliest month with at least even odds of a hike.
“The market in general is in wait-and-see mode ahead of the Fed meeting tomorrow,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “The business cycle is weak currently, so if the Fed hikes later this year I think we are in a vulnerable period. Look for more volatility and little performance in equity markets over the next six months.”
European equities have oscillated amid mixed economic data and signs that central banks may no longer be willing to unquestioningly increase stimulus measures. The Stoxx 600 has failed to maintain the rally that briefly saw it erase the decline sparked by the U.K.’s surprise vote in June to leave the European Union. It closed Friday at a six-week low, and is now 1.5 percent below its pre-Brexit level. It trades at about 14.8 times estimated earnings, near its lowest valuation in two months.
LEG Immobilien AG led real estate stocks to the biggest gains on the European equity gauge today, rising 2.3 percent after Societe Generale SA recommended buying shares in the German property company, citing its underperformance compared with its peers.
Eni SpA helped drag a gauge of oil-related companies to the worst performance on the Stoxx 600, falling 1.8 percent, even as crude reversed earlier declines after Algeria said OPEC may turn its planned informal meeting in Algiers next week into a formal session.
Banks were also among the biggest decliners, with Italian lenders Banca Popolare di Milano Scarl and Banca Popolare dell’Emilia Romagna SC falling 4.3 percent or more. Deutsche Bank slid 3.8 percent.
Among companies moving on corporate news:
- Regus Plc tumbled 6.4 percent as founder Mark Dixon sold 37 million shares.
- IG Group Holdings Plc slid 2.4 percent after saying that the first quarter was challenging as subdued financial markets in July and August offered limited trading opportunities.
- Bayer AG climbed 0.6 percent, paring earlier gains of as much as 2.3 percent, after raising the peak sales forecast for its new-drug portfolio.
- GVC Holdings Plc added 6.6 percent after saying that its 2016 results will be at the upper end of market expectations.