Sun, Aug 13, 2017 - Page 14 News List

European shares mark worst week this year

Reuters, LONDON

A sell-off in heavyweight basic resources stocks prompted a third day of losses for European shares on Friday, posting their worst week this year amid a ramp-up of tensions between the US and North Korea.

Volatility jumped and the pan-European STOXX 600 fell 1.1 percent, taking weekly losses to 2.8 percent, its worst since early November last year.

Eurozone stocks and blue-chips also dropped 0.9 percent, while the miner-heavy FTSE fell 1.1 percent.

The losses have been triggered by a standoff between Washington and Pyongyang, as the war of words between the two intensified.

“Investors have been anticipating that we are due a correction of some sort,” DNB ASA European equity strategist Paul Harper said.

“To some extent they have been expecting something and have just been looking for the catalyst, but if investors are positioned for this already, you are going to need something more to give it significant legs as some might be tempted to buy the dip,” he added.

The VSTOXX, the main European gauge of equity investor anxiety, jumped to a near four-month high, though it remained close to historically depressed levels.

“It’s a big move in the context of what we’ve seen in the course of this year, but in a bigger picture perspective the levels are still relatively moderate,” Harper said.

Basic resource stocks on Friday dropped 2.6 percent to a monthly low as metal prices fell.

ArcelorMittal SA, Rio Tinto PLC, Glencore PLC, Antofagasta PLC, Anglo American PLC and BHP Billiton Ltd fell between 2.3 and 4.5 percent.

Falling crude prices made oil and gas stocks a weight too, dropping 1 percent with Tullow Oil PLC leading the decline.

Banks also fell 1.6 percent, with the sector posting its worst week in nine months.

Drugmaker Galapagos NV was the sole bright spot, up 4.8 percent as brokers upgraded their view on the stock which also outperformed on Thursday after a successful drug trial.

UK mid-cap Dixons Carphone PLC was the worst-performing stock, falling more than 7 percent after a top-rated Exane BNP Paribas SA analyst cut the retailer by two notches to “underperform,” citing concerns about its mobile business.

With most companies having reported second-quarter earnings, a divergence was increasingly visible between eurozone corporates, whose earnings are dented by a stronger euro, and the broader pan-European index.

Overall, earnings growth for MSCI Europe companies was tracking 24 percent, Thomson Reuters data showed, while MSCI Eurozone companies were seeing 16 percent earnings growth for the second quarter.

About 80 percent of companies have reported.

“Results have been fairly okay, but the reaction to the results has been on the soft side ... which perhaps suggests investors are increasingly nervous that valuations are getting to unsustainable levels,” Harper said.

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