MW: European stocks in the red as consumer-goods shares fall, but oil shares rise
European stocks sagged Thursday, as rallying oil prices lifted the energy sector but hindered consumer-goods shares on the prospect of higher inflation.
The Stoxx Europe 600 SXXP, -0.56% fell 0.5% to 340.15, with only the oil and gas SXEP, +0.83% sector advancing on the first day of December trading. Consumer and utility shares fell by the most. The index on Wednesday closed 0.3% higher.
“Market sentiment still looks to be in something of a consolidation mode ... amidst a mix of factors including oil, China and concern over the Italian referendum [that’s] leaving traders in a state of caution,” said Richard Perry, market analyst at Hantec Markets, in a note.
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OPEC boost: Prices of Brent crude oil UK:LCOF7 and West Texas Intermediate oil CLG7, +0.81% both moved 1% higher in choppy trade Thursday. In the previous session, the oil contracts charged up more than 9% after the Organization of the Petroleum Exporting Countries reached a deal to curb daily oil production by 1.2 million barrels.
Read: The surprise OPEC oil deal that was 2 years in the making
In European trade, shares of oil producer Tullow Oil PLC TLW, +2.59% picked up 3%, Italy’s Eni SpA ENI, +1.83% moved up 2%, and oil producer BP PLC BP., +1.14% BP, +1.49% rose 2.6%. BP’s rating was upgraded to outperform at Credit Suisse.
In the oilfield equipment and services group, AMEC Foster Wheeler PLC AMFW, +5.25% advanced 3.3% and John Wood Group PLC WG., +0.55% tacked on 1.7%.
Inflation in focus: Higher oil prices bring a risk of higher inflation, and the higher prices implied could in turn curb consumer spending. Consumer goods shares Q0A, -0.13% lost ground on the benchmark Stoxx Europe 600 Thursday.
Shares of tobacco maker Imperial Brands PLC IMB, -2.56% lost 1.7%, while food producers Nestle SA NESN, -1.54% and Danone SA were down 1.5%.
The prospect of higher inflation pulled bond prices lower and sent yields higher. The yield on Germany’s 10-year bund TMBMKDE-10Y, +10.21% added 4 basis points to 0.31%, and the yield on th U.K.’s 10-year gilt TMBMKGB-10Y, +2.80% moved up 4 basis points to 1.45%. Rising inflation eats into the value of interest payments.
Other movers: Banco Popular Espanol SA shares POP, +8.83% leapt 8.8% as the Spanish lender called an extraordinary board meeting to replace longtime Chairman Angel Ron.
Daily Mail & General Trust PLC DMGT, +0.66% climbed 7.1% after the newspaper publisher posted a 14.4% rise in fiscal 2016 pretax profit.
TalkTalk Telecom Group TALK, -2.94% fell 3.6% after JP Morgan Cazenove downgraded the mobile phone service provider to underweight from neutral.
Glencore PLC GLEN, -0.91% GLCNF, +0.28% rose 1% after the commodities miner and trader said it planned to reinstate its dividend in 2017, beginning with a payout of $1 billion to investors.
National indexes: Germany’s DAX 30 DAX, -0.88% fell 0.4% to 10,594.70, and France’s CAC 40 PX1, -0.67% lost 0.4% at 4,560.36.
Italy’s FTSE MIB I945, -0.11% shed 0.2% to 16,896, and Spain’s IBEX 35 IBEX, -0.47% pulled back 0.2% at 8,669.
Read: Italy’s vote lies in wait for ebullient European banks
And see: What happens if Italy votes ‘no’ on Sunday
The U.K.’s FTSE 100 UKX, -1.25% fell 0.5% to 6,748.29.
The euro EURUSD, +0.3966% was buying $1.0625, up from $1.0600 late Wednesday.
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