European Stocks Take a Breather, Falling From a Two-Month High

Stoxx Europe 600 Index Fell After Three Weeks of Gains

European stocks halted their rally as investors assessed the implications of central-bank stimulus.

The Stoxx Europe 600 Index lost 0.4 percent to 375.89 at the close in London, sliding after a three-week jump, its longest stretch since March. Energy and commodity producers led the decline in the later hours of trading, erasing earlier gains.

Europe’s benchmark gauge rallied the most since July in the final two days of last week as President Mario Draghi hinted that the European Central Bank may add to stimulus measures and the People’s Bank of China cut its benchmark lending rate and banks’ reserve requirements. That helped the Stoxx 600 break away from the tight range it had been trading in for two weeks.

“After last week’s big rally, the market is taking a breather and assessing the outlook for monetary policy on the back of Draghi’s speech and more easing in China,” said Alessandro Bee, a strategist at Bank J Safra Sarasin Ltd. in Zurich. “Central banks will be in focus again with the Fed meeting this week. I don’t expect any significant positioning before then.”

Both the Federal Reserve and the Bank of Japan will give policy updates this week, with the U.S central bank announcing its rate decision on Oct. 28. Traders are pricing in a 6 percent chance of a Fed increase this month and 36 percent in December.

The Stoxx 600 earlier erased a decline of as much as 0.6 percent after data showed German business confidence dropped less than economists had forecast. It then fell again as oil dropped and purchases of new U.S. home plunged in September.

Equities rebounded after posting their biggest quarterly slump in four years. The Stoxx 600 advanced 8.1 percent in October, heading for its biggest monthly rally since 2009, with Germany’s DAX Index surging the most among developed markets, after being battered during the rout. Still, the Stoxx 600 closed 9.2 percent away from the record it reached in April.

PSA Peugeot Citroen declined 3.6 percent after third-quarter sales rose less than analysts had projected. WPP Plc dropped 2.2 percent after the ad company reported a slowdown in U.K. growth. Dialog Semiconductor Plc tumbled 20 percent, the most since 2004, after posting quarterly revenue that missed projections. Deutsche Bank AG lost 1.4 percent after the Financial Times reported that U.S. regulators are widening a money-laundering investigation into the lender’s Russian business.

Securitas AB climbed 3.9 percent after Diebold Inc. agreed to sell its North America security business to the Swedish company. Aberdeen Asset Management Plc advanced 2.9 percent after a report that it’s seeking buyers. A media representative for the company said its founder has never made a formal or informal approach to anyone to buy the business.

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