European Stock-Index Futures Rise After Index Weekly DropSofia Horta e Costa
European stock-index futures increased after the Stoxx Europe 600 Index completed its first back-to-back weekly losses since March, with the German benchmark gauge entering a correction.
Futures on the Euro Stoxx 50 Index expiring in September climbed 0.3 percent to 3,023 at 7:20 p.m. in London. The Stoxx 600 lost 0.6 percent today, posting a 2.1 percent decline for the week and closing at its lowest level since March 24. The DAX Index dropped as much as 11 percent from its July 3 record, while France’s CAC 40 Index lost more than 10 percent in intraday trading from its six-year high in June.
European index futures rose after the close amid signs tension in Ukraine is easing. Interfax said military exercises near the Ukraine border are over, citing Russia’s defense ministry. Shares pared losses earlier after RIA Novosti reported that Russia seeks a de-escalation of the conflict in Ukraine.
U.S. President Barack Obama’s authorization of air strikes against militants in Iraq today accelerated a retreat in European stocks that started weeks ago. Concern over the crises in Ukraine and Israel, as well as shares from Europe’s periphery slumping after their rallies, have sent the Euro Stoxx 50 of euro-area shares down as much as 10 percent in today’s trading from its high on June 19.
The Euro Stoxx 50 has dropped 2.1 percent this week, closing at its lowest level since March 14. It lost 1.2 percent yesterday after European Central Bank President Mario Draghi said geopolitical risks in countries such as Ukraine could hurt the economic recovery. The gauge earlier today fell as much as 1.2 percent, or down 10 percent from this year’s high. It rallied 83 percent from the low in March 2009 through June 19.
The Stoxx 600 is down 7.1 percent from June 10, when it reached its highest level since January 2008.
The VStoxx Index, a measure of expected Euro Stoxx 50 volatility, rose 2.1 percent to 21.24 today, its highest level since March 17.
Shares in Europe’s peripheral nations bore the brunt of the losses. The PSI 20 Index, Portugal’s national benchmark gauge, has slumped 30 percent since its almost three-year high in April and closed at a one-year low. The fallout of Banco Espirito Santo SA helped the gauge post this quarter’s biggest decline among 24 developed markets tracked by Bloomberg, reviving concerns over the health of the financial system.
Italy’s FTSE MIB Index has lost 15 percent since its June high, extending losses after a government report this week showed the nation’s economy fell into a recession in the first half of the year. Greece’s ASE Index is down 24 percent from its high on March 18 and closed at its lowest level since October.
Obama yesterday authorized limited air strikes against Sunni militants in Iraq to protect U.S. personnel and Yezidis, a minority group concentrated in the north of the country who have been targeted by militants and are stranded on a mountain. He also said American military planes are dropping food and water for them.
“This just adds another geopolitical tension to a market that’s already surrounded in uncertainty, with Israel, Ukraine, and now Iraq,” said Francois Savary, chief investment officer at Reyl & Cie. in Geneva. “The big question is whether this will provoke a slowdown in global economic activity, or even a recession, to the extent that you have to reassess the recovery. That’s impacting investors’ reasoning and creates all the conditions for volatility to increase.”