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European shares fall as earnings disappoint

Frankfurt - European stocks deepened a monthly rout as disappointing earnings reports reignited investor concern about global growth prospects and oil prices resumed their downward trend.

BASF SE lost 3.2% after the world’s largest chemical maker said it will book a €600m charge in the fourth quarter because of lower oil and gas prices. Novartis AG dropped 3.9% after the Swiss drugmaker posted earnings and sales that missed projections. Ericsson AB slid 4.7% as its fourth quarter was less profitable than analysts predicted.

The Stoxx Europe 600 Index slipped 0.8% to 336.36 at 12:02. The index is heading for a monthly decline of 8%, its biggest since August. A measure of volatility in the market has risen 31% in January and reached its highest level since September last week.

“Nobody is really sure where we go from here, and nobody is brave enough to make the call,” said Peter Dixon, Commerzbank AG’s global equities economist in London. “Corporate-earnings season won’t provide much of a support - markets may find a floor if the Fed is extremely dovish tonight. At least investors will have time to think and reassess valuations.”

The Federal Reserve releases a monetary-policy statement after the close of European trading. Investors will be looking for indications of the US central bank’s intentions regarding interest rates after January’s market turmoil. Traders are pricing in zero percent chance of a rate hike this month and 24% odds of an increase in March.

Tumbling oil prices have hamstrung global stocks as the two asset classes have become the most correlated since 2013. An increase in oil prices on Tuesday fueled a rebound in European commodity and energy producers, while better-than-expected corporate updates also boosted sentiment. Oil resumed declines today after US industry data showed crude stockpiles increased, adding to a global glut.

A measure of energy companies was among the worst performers on the Stoxx 600. Tullow Oil led the drop with a 7% slide. Commodity producers retreated the most, led by Anglo American and BHP Billiton.

Among other stocks moving on corporate news, Royal Bank of Scotland Group slipped 3.9% after saying it will take a £3.6bn hit to the value of its assets and set aside more money for past misconduct, pushing it to an eighth consecutive annual loss.

ARM Holdings, the semiconductor designer whose technology is used in most smartphones, slid 2.4% after Apple forecast its first drop in sales since 2003. Dialog Semiconductor retreated 2.6% and AMS AG dropped 2%.

Assicurazioni Generali SpA declined 1.7% after the Italian insurer said its chief executive officer won’t serve another term. Mario Greco will join rival Zurich Insurance Group AG from May, according to a separate statement from the Swiss company.

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