European shares drop as Fed hike chances weigh

Frankfurt - European shares declined for a second day as investors assessed further indications that the Federal Reserve may raise interest rates as early as June.

The Stoxx 600 dropped 0.3% to 335.71 at 09:19. Shares retreated yesterday as Bayer AG dragged chemical companies lower and energy producers were hurt by the sliding oil price.

Federal Reserve Bank of Philadelphia President Patrick Harker said late yesterday that he could see two to three rate hikes in 2016 and that if the US economy shows sufficient strength, a June increase would be appropriate. San Francisco Fed President John Williams earlier said two to three hikes this year are “about right.”

Fed chair Janet Yellen is due to deliver remarks on Friday. Fed Funds futures are now indicating for the first time since March a better-than-even  chance that the US central bank will raise interest rates by its July meeting.

A European stock rally from a February low has stumbled since reaching a three-month high in April amid concerns about global-growth prospects, mixed earnings reports and the efficacy of central bank policies. Even after last week’s advance, the Stoxx 600 is down 4.3% from its recent peak.

Among stocks moving on corporate news today, Deutsche Bank dropped 1.1% after Moody’s Investors Service cut the German lender’s credit rating, saying that it faces mounting challenges in carrying out its turnaround plan.

Galenica dropped 4.9% after the owner of Switzerland’s biggest pharmacy network said it will split into separate companies by the end of 2017. In March, the company had said the division would probably occur this year.

Evonik Industries tumbled 6% after a shareholder began selling a 4.2% stake in the chemical company. Kingfisher rose 2% after it reported better-than-expected quarterly sales at its businesses in the UK and France.