Photographer: Boris Roessler/EPA

Europe Stock Rebound Stalls for Third Day as Energy Shares Fall

  • Germany’s DAX advances after Ifo data on business sentiment
  • Italian, Greek equities are among those falling the most

After starting the day with a strong rally, European equities pared most of their gains, with a decline in oil weighing on energy producers.

The Stoxx Europe 600 Index rose 0.2 percent at the close of trading in London, trimming a gain of as much as 0.8 percent following confidence data that showed companies may have withstood the initial shock of the U.K. vote to leave the European Union. Oil firms sank the most since July 6, dragging the benchmark gauge down as much as 0.2 percent before it recovered.

The Stoxx 600 came within 1 percent of erasing its Brexit losses earlier, after figures showed the Ifo institute’s index of German business sentiment fell less than expected in July. But its gain was short-lived: the rebound stalled for a third day after the equity gauge hit a one-month high last week, with lenders’ stress-test results looming. Trading has been especially volatile, and the volume of Stoxx 600 shares changing hands was about 42 percent lower than the 30-day average on Monday.

“I was a little bit surprised to see the market go up the way it did this morning,” said Pierre Mouton, a fund manager who helps oversee $8.5 billion at Notz, Stucki & Cie. in Geneva. “We have the stress-test results for European banks, which might add to some worries about the financial health of the banking system.”

While the Stoxx 600 has regained almost all of its Brexit losses, posting its first back-to-back weekly gains since March, global fund managers have become underweight the shares for the first time in three years. Data on the services and manufacturing industries and corporate earnings were mixed last week, and President Mario Draghi said the European Central Bank will consider increasing stimulus when it has a clearer picture of the impact of the U.K. vote.

Germany’s DAX Index climbed 0.5 percent for the best gain among major western-European markets. Benchmark gauges of Italy and Greece were some of the biggest decliners, falling more than 0.5 percent. The U.K.’s FTSE 100 Index dropped 0.3 percent.

Among stocks moving on corporate news, Banca Monte dei Paschi di Siena SpA fell 8.4 percent after a report that stress-test results due July 29 will show that the Italian lender’s capital is at risk. Pandora A/S dropped 4.7 percent after Carnegie said a survey showed a slowdown in the second quarter. Air France-KLM Group lost 2.3 percent after Societe Generale SA recommended selling the shares.

SEB SA rallied 7.1 percent after saying it targets organic sales growth of more than 5 percent this year. Ryanair Holdings Plc climbed 6.3 percent after it maintained its profit forecast. Julius Baer Group Ltd. rose 2.9 percent after Switzerland’s third-largest wealth manager reported a gain in first-half profit that beat expectations.

William Hill Plc advanced 4.9 percent as 888 Holdings Plc and The Rank Group are considering a joint takeover offer for the bookmaker. Ericsson AB increased 1.5 percent as its chief executive officer stepped down after more than six years at the helm of the Swedish telephone-equipment maker.

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