European Stocks Decline Most in Two Weeks on Fed Hike Prospects

  • Bayer tumbles, while Technip rallies amid deal activity
  • Miners post worst drop among Stoxx 600 industry groups

European Stocks Decline Following FOMC Minutes

European stocks fell after minutes from the Federal Reserve’s last meeting showed officials are ready to raise interest rates next month if the economic pickup stays supportive.

The Stoxx Europe 600 Index lost 1.1 percent at the close of trading, the most in two weeks. Commodity producers fell the most among industry groups as metals slid. Fresnillo Plc and ArcelorMittal slid at least 5.8 percent.

“The markets were getting a little too complacent for the scope for rate hikes this year and next year, but the Fed minutes were on the hawkish side yesterday, so that made investors nervous,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “It’s also having a negative spill-over on equity markets.”

The hawkish central-bank minutes follow speeches by regional Fed bank presidents warning investors not to dismiss a mid-year hike. Traders are now pricing in a 26 percent probability of higher U.S. borrowing costs next month, from just 4 percent on Monday. The first month with at least even odds for a rise has been brought forward to September, from as late as February 2017 a week ago.

A stock rally from a February low has stalled after reaching a three-month high in April amid concerns about global-growth prospects and mixed earnings reports. While gains in banks pushed the Stoxx 600 to its highest level since May 2 yesterday, the gauge has still gone a month without posting a daily gain of at least 1 percent. It’s down 4.8 percent since its recent peak.

Some shares moved on deal activity today. Bayer AG tumbled 8.2 percent after Monsanto Co., the world’s largest seed maker, said it received an unsolicited takeover approach from the company. Technip SA jumped 6.3 percent after agreeing to merge with FMC Technologies Inc. in an all-stock deal create a $13 billion company.

Thomas Cook Group Plc tumbled 19 percent after saying full-year earnings will be at the lower end of analyst estimates, hurt by terror attacks in Brussels and unrest in Turkey.

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