European stocks fell for a third day, with banks from the so-called peripheral nations leading the losses. The Stoxx Europe 600 Index dropped 0.4 per cent at 2pm in London, extending its lowest level since December 2014.
The gauge climbed as much as 1.2 per cent after the market opened and later fell 0.8 per cent. While energy producers rebounded, banks continued to trade lower, heading for their lowest levels since 2012. A third week of declines left the Stoxx 600 more than 20 per cent below its April record, meeting the common definition of a bear market.
On Monday, trading in its shares was about 40 per cent greater than the 30-day average. “We see this as a buying opportunity for the mid or long term,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm manages about €250 million. “Still, volatility indexes are on levels which are far away from calm waters. We are still in risk off mode, so don’t expect a V-shaped correction to the upside.”
Equities
Worries over global growth and an oil rout took over sentiment, sending European equities back to where they were before the region’s central bank announced it would start its quantitative-easing program. In 2016 alone, the Stoxx 600 lost 9.8 per cent through Friday, closing at its lowest level since December 2014. The VStoxx Index, a measure tracking volatility in euro-area shares, reached its highest level since September. The declines took the Stoxx 600’s valuation below 14 times estimated earnings last week, while the multiple for the Standard and Poor’s 500 Index fell to 15.3. Futures on the gauge slipped 0.2 percent on Monday, with US markets closed for a holiday. Italian lenders Banca Monte dei Paschi di Siena SpA and Banca Popolare dell’Emilia Romagna SC sank more than 8.5 per cent on concerns about asset quality. Greece’s Alpha Bank SA tanked 11 per cent. Italy’s FTSE MIB Index, Portugal’s PSI 20 Index and Greece’s ASE Index all fell more than 2 per cent. Benchmark equity gauges of France and Germany dropped at least 0.5 per cent.
Oil
Brent crude traded near a 12-year low in London, briefly dipping below $28 a barrel, after the lifting of international sanctions on Iran paved the way for increased supply amid a global glut. Futures were little changed after earlier dropping as much as 4.4 per cent in London to the lowest since November 2003. Iran is beginning efforts to boost output and exports by 500,000 barrels a day now that restrictions have ended.
“The likely increase of Iranian oil production could not have come at a more unfavorable point in time, with the oil market being oversupplied and renewed economic concerns,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said in a report.
China
The embattled head of China’s securities regulator, Xiao Gang, widely blamed by investors for mishandling a recent crisis that wiped over $5 trillion off the value of the Shanghai and Shenzhen stock markets, has offered to resign, sources said on Monday. The China Securities Regulatory Commission (CSRC) denied Xiao had offered to resign. “This information does not conform to the facts,” it said via Weibo, a popular microblogging site.
Xiao, 57, tendered his resignation as CSRC chairman last week after his brainchild - a “circuit breaker” mechanism to limit market losses - was blamed for exacerbating a sharp sell-off, a source with ties to the leadership and a financial industry source told Reuters. The “circuit breaker” was deactivated on Jan. 7, just three days after its introduction.
Meanwhile China is expected to announce its slowest annual expansion in more than two decades on Tuesday. The Chinese government will probably say fourth-quarter gross domestic product grew 6.9 per cent on Tuesday, according to economists’ estimates. They project expansion for 2015 at 6.9 per cent, the slowest since 1990, and that GDP growth will further slow to 6.5 per cent this year, in line with official targets set in March. Other data also due Tuesday are expected to show retail sales increased 11.3 per cent from a year earlier, the fastest pace in 12 months, while industrial production probably fell to a 6 per cent year-on-year growth rate, the projections showed Monday.
(Bloomberg/Reuters)
