European Stocks Tumble to One-Year Low on Crisis ConcernJonathan Morgan
European stocks fell to this year’s low, with the benchmark index posting its longest slump in 11 years, as concern grew that a financial crisis is returning to the region’s so-called peripheral nations.
Even so, the Stoxx Europe 600 Index pared a decline of as much as 2.9 percent after St. Louis Federal Reserve Bank President James Bullard said the Fed should consider delaying the end of its bond purchase program.
The Stoxx 600 dropped 0.4 percent to 310.03 at the close, falling for an eighth day. The gauge earlier slumped to a one-year low as Spain’s failure to reach its maximum target in a bond sale highlighted the fragility of the country’s recovery.
“We’ve reached the part of the cycle where bad news is bad news,” Steen Jakobsen, chief investment officer at Saxo Bank A/S in Copenhagen, said in a phone interview. “For years, we’ve been trading on monetary policy. Now we have to deal with real economic problems, and that of course, for the markets is a totally different kettle of fish.”
In an interview with Bloomberg, Bullard said the Fed should consider delaying the end of its bond purchases to halt a decline in inflation expectations. The Fed has been winding down its $85 billion plan of monthly bond purchases since January and is poised to stop the final $15 billion this month.
National Benchmark indexes dropped in 15 of the 18 markets in western Europe. Portugal’s PSI 20 Index slumped 3.2 percent to a two-year low, Spain’s IBEX 35 Index lost 1.5 percent to this year’s low. Volume changing hands in Stoxx 600 companies was more than double the 30-day average, according to data compiled by Bloomberg.
The Stoxx 600 extended losses in the morning after Spain’s government raised 3.2 billion euros ($4.1 billion) in bond actions, below its maximum target of 3.5 billion euros. The gauge has tumbled 7.7 percent since Oct. 6 as the International Monetary Fund cut its global-growth forecasts, and German industrial production and investor confidence declined.
Concern about the euro area is reaching a tipping point, with the region is leading a rout that wiped $5.5 trillion from the value of equities worldwide. While data from industrial production in Germany to retail sales in the U.S. has contributed to the gloom, sentiment began souring on Oct. 2, when European Central Bank President Mario Draghi stopped short of spelling out for how long the ECB might buy assets to head off deflation.
“There is a combination of concerns over the outlook for global growth and concerns on the outlook for inflation in the wake of a slew of negative data,” Jeremy Batstone-Carr, head of research at Charles Stanley & Co., said in a phone interview. “There is the likelihood that third-quarter corporate earnings expectations which have already been lowered may very well be lowered again over the fourth quarter given the poor macroeconomic backdrop.”
In Italy, Prime Minister Matteo Renzi’s Cabinet passed tax cuts that raised doubts among economists whether they comply with the European Union rules. Italian lenders pushed a gauge of European banks to the worst performance among the industry groups on the Stoxx 600.
Banca Monte dei Paschi di Siena SpA and Banca Popolare di Milano Scarl slid 8.7 percent to 81.7 euro cents and 4.9 percent to 53.9 euro cents, respectively. Italy’s FTSE MIB Index lost 1.2 percent to this year’s low.
A report today showed industrial production in the U.S. rose in September by the most since November 2012. The 1 percent advance in output at factories, mines and utilities exceeded the highest forecast in a Bloomberg survey and followed a 0.2 percent drop the prior month, the Federal Reserve reported today in Washington.
Nestle SA slipped 3 percent to 64.95 Swiss francs. The world’s biggest food company said nine-month sales excluding acquisitions increased 4.5 percent, missing the 4.7 percent gain expected by analysts.
Shire Plc, which yesterday plunged the most in 11 years, tumbled 7.3 percent to 3,718 pence today, after AbbVie Inc.’s board formally asked shareholders to vote against its takeover of the company.
Man Group Plc advanced 3.1 percent to 111.7 pence. The world’s largest publicly traded hedge-fund manager said assets under management jumped 25 percent in the third quarter, in line with some analysts’ estimates, helped by acquisitions in the U.S.