Europe Stocks Fall After Posting Smallest Year Gain Since 1992Alan Soughley and Sofia Horta e Costa
European stocks declined on the first trading day of the year after completing the smallest annual advance since 1992.
The Stoxx Europe 600 Index slipped 0.4 percent to 341.33 at the close of trading, paring earlier losses of as much as 0.7 percent. The gauge had earlier risen as much as 0.6 percent before falling as a measure of euro-area manufacturing expanded less in December than initially estimated. The number of shares changing hands in Stoxx 600-listed companies was 36 percent lower than the average of the past 30 days, data compiled by Bloomberg showed. The Swiss market was closed for a holiday.
Strategists forecast advances for European stocks through the end of 2015 amid bets that European Central Bank President Mario Draghi will step up measures to support the region’s economy. Draghi told German newspaper Handelsblatt that he can’t exclude the risk of deflation in the euro area, suggesting that the likelihood of large-scale quantitative easing is increasing.
“As long as central banks continue to aggressively try to jumpstart their growth rates then we should be fairly confident going into 2015,” said Thomas Thygesen, head of cross-asset strategy at Skandinaviska Enskilda Banken AB in Copenhagen. Still, “there are plenty of things in the first quarter that could unsettle such a scenario. Many tripwires have been laid out. If oil prices do not stabilize, for example, I think many people will start to feel the heat in a different way.”
A measure of energy companies added 0.1 percent today after slumping 15 percent last year, the most among the 19 industry groups in the Stoxx 600.
A final reading of a purchasing managers’ index for euro-area factory output stood at 50.6 in December, London-based Markit Economics said today. While that’s up from a 17-month low of 50.1 in November, it’s below a 50.8 estimate released on Dec. 16 and barely above the mark of 50 signaling expansion.
The Stoxx 600 extended declines as a report from the Institute for Supply Management showed U.S. manufacturing cooled in December. The group’s factory index fell to a six-month low of 55.5 from 58.7 in November. Economists had forecast 57.5.
European stocks rose for a third year in 2014, with a 4.4 percent gain. That compared with rallies of 17 percent in 2013 and 14 percent in 2012. Europe’s equity benchmark lost 1.4 percent last month, its first December decline since 2008, amid a slump in oil prices and in Greek equities as Prime Minister Antonis Samaras failed to get enough backing for his presidential candidate, leading to early elections.
While the Stoxx 600 dropped in December, the Standard & Poor’s 500 Index, Dow Jones Industrial Average and Russell 2000 Index climbed to records, and the Nasdaq Composite Index reached its highest level since March 2000.
Royal Bank of Scotland Group Plc slipped 1.3 percent after earlier losing as much as 2.9 percent. The bank may be fined more than 5 billion pounds ($7.77 billion) over its involvement in the sale of toxic mortgage-backed debt in the U.S., the Times reported, citing people familiar with the matter. RBS has set aside 1.9 billion pounds for a settlement, according to the newspaper.
Rio Tinto Group and Anglo American Plc were among stocks dragging a gauge of commodity producers 1 percent lower today, for the second-worst performance on the Stoxx 600. The measure of mining companies slid 6.2 percent last year, for the biggest drop after oil stocks.
Banks posted the best performance of the 19 industry groups on the equity benchmark. Portugal’s Banco Comercial Portugues SA led gains, climbing 7 percent. Spain’s Banco Popular Espanol SA rose 6.4 percent and Italy’s Banca Popolare di Milano Scrl climbed 5.1 percent.