BLBG: Europe Stocks Drop After Posting Smallest Annual Gain Since 1992
European stocks declined on the first trading day of the year after completing the smallest annual advance since 1992.
The Stoxx Europe 600 Index fell 0.3 percent to 341.62 at 11:20 a.m. in London, after earlier rising as much as 0.6 percent. The gauge fell as much as 0.6 percent as a measure of euro-area manufacturing expanded less in December than initially estimated. The number of shares changing hands in Stoxx 600-listed companies was 32 percent lower than the average of the past 30 days, data compiled by Bloomberg showed. The Swiss market is closed for a holiday.
“As long as central banks continue to aggressively try to jumpstart their growth rates then we should be fairly confident going into 2015,” said Thomas Thygesen, head of cross-asset strategy at Skandinaviska Enskilda Banken AB in Copenhagen. Still, “there are plenty of things in the first quarter that could unsettle such a scenario. Many tripwires have been laid out. If oil prices do not stabilize, for example, I think many people will start to feel the heat in a different way.”
The Trouble With Falling Prices
A final reading of a purchasing managers’ index for euro-area factory output stood at 50.6 in December, London-based Markit Economics said today. While that’s up from a 17-month low of 50.1 in November, it’s below a 50.8 estimate released on Dec. 16 and barely above the mark of 50 signaling expansion.
European stocks rose for a third year in 2014, with a 4.4 percent gain. That compared with rallies of 17 percent in 2013 and 14 percent in 2012. Europe’s equity benchmark lost 1.4 percent last month, its first December decline since 2008, amid a slump in oil prices and in Greek equities as Prime Minister Antonis Samaras failed to get enough backing for his presidential candidate, leading to early elections.
U.S. Records
While the Stoxx 600 dropped in December, the Standard & Poor’s 500 Index, Dow Jones Industrial Average and Russell 2000 Index climbed to records, and the Nasdaq Composite Index reached its highest level since March 2000.
Strategists forecast more advances for European stocks through the end of 2015 amid bets that European Central Bank President Mario Draghi will step up measures to support the region’s economy. Draghi told German newspaper Handelsblatt that he can’t exclude the risk of deflation in the euro area, suggesting that the likelihood of large-scale quantitative easing is increasing.
Standard & Poor’s 500 index futures rose 0.4 percent today. The MSCI Asia Pacific Excluding Japan Index added 0.2 percent on low trading volume with the region’s two largest markets shut for holidays.
Royal Bank of Scotland Group Plc slipped 2 percent. The bank may be fined more than 5 billion pounds ($7.77 billion) over its involvement in the sale of toxic mortgage-backed debt in the U.S., the Times reported, citing people familiar with the matter. RBS has set aside 1.9 billion pounds for a settlement, according to the report.
To contact the reporters on this story: Alan Soughley in Frankfurt at asoughley@bloomberg.net; Sofia Horta e Costa in London at shortaecosta@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Alan Soughley
