Apparent Calm in European Stocks Masks Wildest Days of the Year

  • Bayer drags chemical companies down on convertible bonds issue
  • ABN Amro sending lenders lower after reporting rising spending

European Stocks End Two-Day Winning Streak

An early rally in European shares deflated, leaving the market little changed. That’s been the state of play for investors in recent days.

While Donald Trump’s election last week dominated market moves and created a rift among industries, it has left the region’s equities largely flat. Intraday, though, investors have had to contend with the wildest swings since last December, with the Stoxx Europe 600 Index alternating between gains and losses for seven straight days. The gauge slipped 0.2 percent at the close after jumping 0.6 percent and falling as much.

“These swings show how stocks in Europe can’t hold their own at the moment,” said Steven Santos, a broker at Banco de Investimento Global SA in Lisbon. “People are only just recovering from election week, focusing on what’s next and realizing that things still look pretty difficult for Europe. There isn’t much conviction either way, but there’s a lot of money being put to work, which is why the market keeps on flipping around.”

Even as investors have been putting money back into the market -- cash levels fell to 5 percent in November from a high of 5.8 percent last month, a Bank of America Corp. report showed -- the initial jump on Trump’s victory didn’t last. The Stoxx 600 has lost 0.4 percent in five days, taking its decline from a September high to 3.5 percent. The gauge remains below its pre-Brexit level.

On Wednesday, Bayer AG was one of the biggest contributors to the move in the Stoxx 600, sinking 4.2 percent and dragging down chemical companies after issuing 4 billion euros ($4.3 billion) of convertible bonds. Bouygues SA rose 2.7 percent as the French conglomerate reported an improvement in telecom profitability.

ABN Amro Group NV pushed lenders lower, losing 4.1 percent after reporting rising costs and innovation spending. Separately, the Dutch government said after the close of Wednesday’s trading that it plans to sell a 7 percent stake in the lender.

The Stoxx 600 trades at 14 times its members’ projected earnings, or about 7 percent higher than its five-year average. While analysts still expect a 3.5 percent contraction in profit this year, that’s better than the 4.5 percent drop forecast a month ago. But even the most encouraging earnings season since the start of 2015 hasn’t been enough to draw investors back into European equities: Managers once again withdrew money from funds tracking the shares last week after the first inflows in 39 weeks.

“The problem is that skepticism still dominates and valuations aren’t particularly inviting,” said Gilles Guibout, head of European equity strategy at AXA Investment Managers in Paris. His firm manages $727 billion.

Among other stocks moving on corporate news:

  • Hugo Boss AG slumped 10 percent after saying it won’t return to growth until 2018.
  • Rolls-Royce Holdings Plc fell 2.1 percent as the British manufacturer reiterated it sees a decline in annual profit and lower group revenue.
  • Schneider Electric SE dropped 2.9 percent after some of its investors sold shares.
  • Wirecard AG, a German payments provider, climbed 7.5 percent as the top end of its 2017 profit forecast exceeded some analysts’ estimates.
    Before it's here, it's on the Bloomberg Terminal.