Europe Stocks Little Changed, While Miners Drop for Second Day

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European Stocks Little Changed After Erasing Gains

A slide in commodity producers weighed on European equities, which pared earlier gains amid speculation over a potential increase in U.S. borrowing costs this year.

While a weaker euro initially helped the Stoxx Europe 600 Index rise as much as 0.9 percent, the gains were short-lived. The gauge fell 0.3 percent before ending the day up 0.1 percent. Miners dropped the most, as commodities declined on a stronger dollar after Federal Reserve Vice Chairman Stanley Fischer signaled a hike is still possible this year.

The remarks follow those of San Francisco Fed President John Williams, who said last week a hike in September is “in play.” That’s “spooking” markets, according to BNP Paribas Fortis’s Philippe Gijsels, as the Stoxx 600 trades at about 15 times estimated earnings, near its highest level of the year. 

“We have been moving back and forth with this rate increase for a while,” said Gijsels, chief strategy officer at BNP Paribas Fortis in Brussels. “If you look at valuations, they’re not particularly cheap, so indeed markets have been very well supported. Therefore, they’re worried that interest rates will go up.”

Speculation over the timing of the next U.S. rate increase is adding to the concerns that have hit Europe this year. Italy is battling a banking crisis, while faith in the European Central Bank’s ability to spur growth amid political turmoil has dwindled. The Stoxx 600 just had its biggest weekly selloff since before the U.K. referendum on European Union membership.

Despite a rebound of as much as 12 percent following the U.K. referendum, the Stoxx 600 has lost 6.9 percent in 2016, and strategists expect the index will take its annual decline to 8.6 percent. At the same time, a Bank of America Corp. report showed investors have withdrawn money from the region’s funds for a record 28th straight week.

The U.K.’s FTSE 100 Index slipped 0.4 percent on Monday, with miners Fresnillo Plc, Anglo American Plc and Randgold Resources Ltd. falling more than 4 percent. Gauges of German and French stocks erased earlier advances to retreat at least 0.2 percent. Italy’s FTSE MIB Index advanced 0.4 percent, led by gains in Banca Popolare di Milano Scarl and Banco Popolare SC.

Among stocks moving on corporate news:

  • Getinge AB fell 4 percent as it ousted its chief executive officer after less than 18 months on the job because of disagreements on the future direction of the Swedish maker of sterilization systems. 
  • Heavyweight Syngenta AG jumped 11 percent, the most in more than a year, as China National Chemical Corp. received approval from U.S. national security officials for its $43 billion takeover of the Swiss chemical company.
  • Teleperformance SA rallied 9 percent after the call-center operator agreed to buy LanguageLine Solutions LLC for $1.5 billion to expand in the U.S. market.
  • Kingspan Group Plc climbed 7 percent after the Irish maker of building insulation panels posted a surge in revenue in the first half of the year.