European stocks retreated, erasing earlier gains, as banks from peripheral euro-area nations tumbled. U.S. index futures and Asian shares also declined.
The Stoxx Europe 600 Index fell 0.7 percent to 326.49 at 12:18 p.m. in London. A measure of lenders slid after European Banking Authority Chairman Andrea Enria said that the conclusion of the regional asset-quality review and stress tests won’t lead to an immediate boost in lending. Shares extended declines after data showed consumer prices in some German states unexpectedly fell in October. The equity gauge briefly pared losses after a report that euro-area economic sentiment improved this month.
“They told us the European financial system has strengthened, but it obviously still sits on poor performing assets,” David Wartenweiler, chief investment officer at Habib Bank AG, said by telephone from Zurich, referring to the ECB’s tests. “Its ability to generate credit growth is limited. Numbers have gotten better but neither the supply nor demand for credit is particularly strong in the eurozone.”
European shares have fallen 6.4 percent since a September high amid investor concern that ECB stimulus measures won’t be enough to spur growth, while China’s economy is slowing just as the Federal Reserve ends its bond-buying program. Standard & Poor’s 500 Index futures fell 0.4 percent Thursday, and the MSCI Asia Pacific Index lost 0.3 percent.
Consumer prices in some German regions, including Saxony, Hesse and Brandenburg, unexpectedly fell last month. A report at 2 p.m. will show that consumer prices in the whole of Germany, calculated using a harmonized European Union method, rose an annualized 0.9 percent in October, up from 0.8 percent last month, according to the median forecast in a Bloomberg News survey of economists.
“People have to review and reposition themselves for a lackluster growth outlook for the eurozone,” said Wartenweiler. “Stagnation for another quarter is most likely. That wasn’t in the cards earlier in the year and markets have to grapple with it.”
Still, an index of executive and consumer confidence in the euro area increased to 100.7 from 99.9 in September, the European Commission in Brussels said Thursday. That’s the first gain in three months. Economists had predicted a drop to 99.7.
German unemployment unexpectedly declined in October, the Nuremberg-based Federal Labor Agency said Thursday. The number of people out of work fell a seasonally adjusted 22,000 to 2.887 million. Economists had forecast an increase of 4,000. The adjusted jobless rate was unchanged at 6.7 percent, the lowest level in more than two decades.
National benchmark indexes fell in 16 of the 18 western- European markets on Thursday. Germany’s DAX Index lost 1.5 percent, France’s CAC 40 Index declined 1.1 percent, and the U.K.’s FTSE 100 Index slid 0.9 percent. Greece’s ASE Index tumbled 3.8 percent, for the biggest drop in the region, as local banks plunged.
The Fed late Wednesday announced an end to its asset- purchase program, citing job gains for its decision to wind up the unprecedented initiative that has suppressed U.S. yields and fueled capital inflows into equities. Officials kept a commitment to hold interest rates low for a considerable time.
Reports at 8:30 a.m. in Washington may show U.S. gross domestic product rose an annualized 3 percent in the third quarter, after expanding 4.6 percent in the previous three months, while jobless claims increased in the week ended Oct. 25, according to the median of economists’ estimates.
A gauge of bank-related stocks posted the second-biggest decline of the 19 industry groups on the Stoxx 600 as Enria said that the ECB’s stress test on lenders in the region wasn’t foolproof. Speaking at an event in Berlin, he also said that the results of the exercise, announced Oct. 26, show that banks still have a lot of work to do to ensure capital adequacy.
Banco Santander SA dropped 2.4 percent to 6.70 euros. Banco Bilbao Vizcaya Argentaria SA retreated 2.9 percent to 8.56 euros. Italy’s Banca Monte dei Paschi di Siena SpA tumbled 18 percent to 60.2 euro cents. National Bank of Greece SA dropped 7.5 percent to 1.85 euros.
Barclays Plc added 0.8 percent to 222.3 pence, after earlier rising as much as 2.2 percent. Quarterly earnings increased even as the bank set aside 500 million pounds ($799 million) to settle probes into currency markets. Adjusted pretax profit increased to 1.59 billion pounds from 1.39 billion pounds a year earlier. That beat the 1.1 billion-pound average estimate of analysts.
Volkswagen AG climbed 0.5 percent to 162.95 euros, paring earlier gains of as much as 4.8 percent. Europe’s largest automaker reported quarterly profit that beat analyst predictions on sales growth at the Audi and Skoda brands. Earnings before interest and taxes rose 16 percent to 3.23 billion euros ($4.06 billion). That beat the 2.81 billion-euro average analyst estimate. Sales rose 4.1 percent to 48.9 billion euros.
Renault SA advanced 2.3 percent to 56.89 euros. Europe’s third-largest carmaker said late on Wednesday that revenue rose to 8.53 billion euros. That beat the 8.19 billion-euro average of analyst estimates.
Bayer AG increased 1.1 percent to 108.25 euros. Germany’s biggest drugmaker reported third-quarter earnings before interest, taxes, depreciation and amortization excluding certain items of 2.01 billion euros, topping analyst calls for 1.95 billion euros. Bayer also raised its forecast for the year.
Linde AG fell 4.2 percent to 148.75 euros after the world’s largest industrial-gases company said it will miss full-year and 2016 profit goals. Operating profit will be at a similar level to 2013, with a 10 percent return on capital employed. Linde had previously forecast a “moderate” improvement in operating profit. [Bloomberg]