Investors Look to ECB for More Rate Cuts, European Stocks Struggle

Lucy Stoeva
07 Apr, 2016
New York City

European markets reversed earlier gains as concerns about further rate cuts dragged down shares of banks. Oversea-Chinese Banking acquired wealth management unit in Asia for $320 million from Barclays. Peugeot is looking to raise capital in the high yield bond market.

[R]4:00 PM Frankfurt, Germany - European markets reversed earlier gains as concerns about further rate cuts dragged down shares of banks. Oversea-Chinese Banking acquired wealth management unit in Asia for $320 million from Barclays. Peugeot is looking to raise capital in the high yield bond market.[/R]

European markets erased earlier gains and dropped in negative territory on Thursday as weakness in banking and mining stocks offset gain in healthcare.

Bank shares led the decline after comments from several European Central Bank officials indicated that further rate cuts are possible in the already low interest rate environment.

Policymaker’s minutes of the meeting in March noted additional rate reductions were not anticipated, but were not ruled out in case new shocks changed the outlook for inflation.

Separately, ECB Vice President Vitor Constancio said the bank would do everything necessary to reach the targeted inflation near 2%.

ECB’s chief economist, Peter Praet, said the bank could engage additional stimulus to offset fresh shocks to the economy.

In France, BNP Paribas tumbled 4.3% and Societe Generale erased 4.2%, while in the U.K., Lloyds Banking Group plummeted 4.8%. In Germany, Commerzbank and Deutsche Bank lost about 3% each.

Mining stocks were also among the major losers due to ongoing concerns about global demand. Anglo American fell 3.1%, Antofagasta was down 2.7%, and Glencore tumbled 5.7%

Adding to the decline, several major companies went ex-dividend, or traded without the right to their latest dividends.

In the U.K, Pearson lost 4.9%, Aviva erased 4.5% and Taylor Wimpey was down 3.8%. In Germany, Daimler fell 4.8% and in Sweden, Skanska plunged 8.9%.

On the positive side, healthcare stocks continued to rise for a second session after the Pfizer-Allergan merger was canceled.

Shire Plc rose 0.8% after the company said it expected its acquisition of U.S drug maker Baxalta to proceed as planned.

AstraZeneca added 1% and GlaxoSmithKline gained 0.8%.

Randgold Resources climbed 3.2% as gold prices surged more than 1% today.

In London, the FTSE 100 index fell 30.97, or 0.50%, to 6,130.66, while in Frankfurt, the DAX index lost 112.70, or 1.17%, to 9,511.81.

In Paris, the CAC 40 index dropped 45.77, or 1.07%, to 4,238.87.

Barclays Plc shed 1.64% to 147.10 pence after Oversea-Chinese Banking Corp said it will acquire Barclays’s wealth and investment management business in Singapore and Hong Kong for $320 million.

Marks & Spencer Group Plc jumped 3% to 433 pence despite a lackluster quarterly update.

Comparable clothing and home sales fell 2.7% in the quarter ended 26 March. The average price of the spring womenswear collection was £35, down from £40 a year ago.

However, M&S ran 40% fewer clothing promotions during the quarter and boosted margins to the top end of expectations, said CEO Steve Rowe.

Sales in the food division were flat, although market share expanded to 4.3% after M&S opened 80 stores.

Peugeot SA fell 2.9% to €13.12 after Pierre-Olivier Salmon, company spokesman, said Peugeot was assessing the sale of high yield bonds to investors.