Parliamentary testimony of ex–Barclays chief in market spotlight
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — Losses for banks proved a drag for European stock markets Wednesday, with attention fixed on Barclays PLC and the Libor-fixing scandal, while energy stocks also weighed as crude prices pulled back from five-week highs.
The Stoxx Europe 600 index XX:SXXP -0.41% fell 0.3% to 256.50, after rallying 1% the prior day.
Volumes were pegged lower for Wednesday’s action with Wall Street closed for the Fourth of July holiday. However, potential further fallout for banks from the interest-rate scandal was expected to keep traders from nodding off.
Ex–Barclays CEO Bob Diamond will testify in front of the U.K. Parliament’s Treasury Select Committee on Wednesday, a day after he and the company’s UK:BARC -0.06% BCS -2.14% BCS -2.14% BCS -2.14% chief operating officer stepped down in the wake of the Libor scandal. MarketWatch Live Blog: Bob Diamond testifies before British Parliament .
Banking-group losses were not limited to Barclays, which was off 0.3%. HSBC Holdings PLC UK:HSBA -1.14% HBC -0.20% fell 1.3%. Shares of Royal Bank of Scotland Group PLC UK:RBS -1.25% RBS -2.86% fell 1.5%.
Marked by those losses, the FTSE 100 index UK:UKX -0.10% fell 0.1% to 5,679.92.
As well, shares of BP PLC BP +0.29% UK:BP -0.53% dropped 0.5% and Tullow Oil PLC UK:TLW -2.35% fell 2.2%. Oil prices stepped back from the five-week highs reached Tuesday on geopolitical jitters and hopes for further monetary easing/stimulus policies from Europe’s central banks. See: Oil futures retreat as U.S. dollar rise.
The European Central Bank and Bank of England will both hold monetary-policy meetings Thursday. Private-sector activity across the 17-nation euro zone saw another sharp contraction in June, but the pace slowed from May, according to the Markit composite purchasing managers' index for the region.
“The ECB is widely expected to ease [its] key rate by 25 basis points tomorrow, but we can’t help thinking that additional market-friendly action is required from [ECB President Mario] Draghi to sustain this rally,” said strategists at Deutsche Bank in a note referring to recent gains for equity and credit markets.
“The market is hoping that politicians have done enough to encourage the ECB to lend a hand. We suspect that they won’t add additional support for now which may lead to some disappointment,” the strategists said.
Also Thursday, the Bank of England’s Monetary Policy Committee is expected to introduce another round of quantitative easing. A separate survey by Markit showed the pace of growth in the U.K.’s services sector slowed in June.
The French CAC 40 index FR:PX1 -0.74% fell 0.7% to 3,247.10 as BNP Paribas SA FR:BNP -1.73% fell 1.7%.
Retailer Carrefour SA FR:CA -5.61% dropped 2.1%.
German utility E.On AG DE:EOAN -2.08% gave up 2.6, driving the DAX 30 index DX:DAX -0.65% down 0.7% to 6,532.23.
Shares of E.On were downgraded by two brokers Wednesday. Analysts at Citi cut the energy group to sell from neutral, citing a deteriorating operating environment, while J.P. Morgan cut it to neutral from overweight, saying the shares are likely to pause for breath after an 18% rise in the past month
A day prior, the utility lifted its 2012 earnings outlook after settling a disagreement with Russia’s OAO Gazprom RU:GAZP +2.33% over long-term gas-supply contracts.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
