European Stocks Fall as U.S. Manufacturing Report Deflates Rally

  • Altice leads telecom shares to worst drop in Stoxx 600
  • Stoxx 600 reversed intraday rally of as much as 1.5%

An early advance in European stocks proved fragile, turning to losses after a report showed U.S. manufacturing deteriorated in September.

Signs of stabilization in China’s factory data had boosted investor optimism earlier today, with rallies in miners and energy shares sending the Stoxx Europe 600 Index up as much as 1.5 percent. The gains evaporated after the Institute for Supply Management’s manufacturing index missed estimates, falling for a third month.

Europe’s benchmark gauge lost 0.4 percent to 346.23 at the close of trading. Concern about a slowdown in China and uncertainty over the timing of a Federal Reserve rate increase sent the Stoxx 600 to its worst quarterly drop in four years.

“We mustn’t be surprised to see swings like we see, even on an intraday basis,” said Pierre Mouton, a fund manager at Notz, Stucki & Cie. in Geneva. “The situation remains unclear. Is China slowing, stabilizing or crashing? Will Janet raise rates before December, in December, or later in 2016? Each time we’ll have nice rebounds there’s a chance we have profit taking afterwards.”

Traders are pricing in a 43 percent probability of a rise in December and almost even odds of a January increase. A U.S. government report on payrolls tomorrow may offer further indications on whether the economy is strong enough to withstand higher borrowing costs.

Altice Slide

Telecommunications companies fell the most among Stoxx 600 groups, with Altice NV tumbling 9.3 percent after saying it will sell shares to finance its acquisition of Cablevision Systems Corp. Deutsche Telekom AG fell 5.2 percent. Scout24 Holding GmbH, an online classifieds business partly owned by Deutsche Telekom, dropped 3.5 percent on its first day of trading.

Energy shares were the biggest gainers today. Tullow Oil Plc jumped 9.6 percent after saying its unchanged credit facilities shows continued support from lenders. Repsol SA added 3.7 percent after agreeing to sell part of its piped-gas business.

While BHP Billiton Ltd. and Randgold Resources Ltd. paced gains in commodity producers, a rally for Glencore Plc was short lived. After jumping 8.2 percent and briefly erasing a weekly slump, the shares traded 0.6 percent lower.

Germany’s DAX Index reversed gains of as much as 1.3 percent to tumble 1.6 percent. Volkswagen dropped 1.3 percent after earlier climbing 5.6 percent. A Markit Economics report showed the a gauge of the country’s manufacturing fell last month to the lowest level since July.

The ASE Index fell 1.8 percent as National Bank of Greece SA and Alpha Bank AE tumbled 9 percent or more. A gauge of Greek lenders slid 9.8 percent to a record low.

Among other stocks active on corporate news, Aryzta AG added 4.7 percent after Societe Generale raised its rating to buy from hold.

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