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London - A drop in oil producers and Italian lenders halted the rebound in European stocks.
The Stoxx Europe 600 Index slipped 0.3% at 12:10, paring a decline of as much as 0.8%. Seadrill and Subsea 7 SA lost more than 4.5% as oil fell after Saudi Arabian Oil, the world’s biggest crude exporter, said it’s keeping up investments in energy projects. Italian banks led the industry lower.
The rout in commodity prices is once again weighing on risk assets amid concern that a slowdown in China will hurt global growth. After reaching their cheapest valuation in about two years on Wednesday, European equities enjoyed their biggest two- day surge since 2011 on speculation the region’s central bank will add to stimulus measures.
“Draghi stopped some of the bleeding last week but the questions surrounding the global macro economy haven’t gone away,” said Peter Garnry, head of equity strategy at Saxo Bank A/S. “The collapse of oil will continue to take its toll on corporate earnings. Investors are losing faith in equity valuations - you can’t justify the multiples we were paying if the world is slowing down.”
The 5% rebound in the two days of last week took the Stoxx 600’s valuation to 14.4 times estimated profit. On Wednesday, the multiple reached 13.8.
Italian shares, the highlight of 2015, are some of the worst performers this year on growing concern over swelling bad debt at its lenders. The country’s FTSE MIB Index again fell the most among major western-European markets on Monday. UniCredit SpA and Unione di Banche Italiane SpA lost more than 3%. Banca Monte dei Paschi di Siena SpA bucked the trend, taking its three-day surge to a record 54%.
Denmark’s Jyske Bank A/S climbed 4.8% after saying that it hit a profitability target despite earlier warnings that it would be difficult. Imagination Technologies Group gained 1.8% on a report that the company will to start a cost- cutting program. Kingfisher dropped 4.4% after Europe’s largest home-improvement retailer said that short-term earnings will suffer from a five-year plan to boost profit.
Spain’s IBEX 35 Index dropped 0.4%, dragged lower by financial shares and Gamesa. Tecnologica SA. Socialist leader Pedro Sanchez and his would-be deputy prime minister officially broached the issue of forming an alliance for the first time as the chances of Mariano Rajoy’s People’s Party clinging on to power receded.
Portugal’s PSI 20 Index advanced 0.4% after Marcelo Rebelo de Sousa, a former Social Democrat leader preaching compromise between the country’s parties, won a presidential election.
Greek stocks rose the most among western-European markets after Standard & Poor’s upgraded the country to B- from CCC+, with a stable outlook. Piraeus Bank SA and National Bank of Greece SA climbed more than 3%, helping send the ASE Index toward its biggest two-day gain in five weeks.
