Europe close: Stocks end lower despite oil price slide

European stocks fell sharply on Wednesday, taking their cue from downbeat sessions in the US and Asia ahead of Friday´s US jobs report for the month of January and despite sharp gains in crude oil futures.

The benchmark Stoxx Europe 600 index was down by 1.54%, Germany’s DAX was 1.53% weaker and France’s CAC 40 was off 1.33%.

“Even much better than expected Chinese Services PMI data released overnight failed to provide markets with much needed optimism,” said Markus Huber, senior analyst at Peregrine & Black.

“Whilst overall sentiment remains negative, many major indices are approaching again the lows of 2016 and 2015 and therefore major support levels. So far markets are still stuck in a wide consolidation pattern, however much lower prices might be needed in order for sentiment to turn and bargain hunters to be tempted back into the markets.”

Data released earlier showed activity in China’s services sector expanded at a faster pace last month.

The Caixin China services purchasing managers’ index rose to 52.4 in January from 50.2 in the previous month, marking the highest level in six months.

However, a similar index linked to the US services sector, and compiled by the ISM, slipped from 53.7 for the month of January to 53.2 - its lowest since October 2013.

Meanwhile, oil prices recovered from Tuesday’s heavy losses, extending earlier gains after Russia suggested it was open to talking with OPEC about output cuts. Russian foreign minister Sergei Lavrov said if there is consensus among OPEC and non-OPEC members to meet, “then we will meet”.

By the close of trading, West Texas Intermediate crude oil futures were up 5.4% at $34.59 while Brent crude were 5.6% higher to $31.67.

In corporate news, stock in AstraZeneca nudged lower despite winning European regulatory approval to market its Tagrisso-branded tablets for the treatment of adult patients with certain forms of lung cancer.

Shares in Finnish utility company Fortum tumbled after it reported a bigger-than-expected decline in fourth-quarter earnings.

KPN was also in the red after the Dutch telecom group’s fourth quarter numbers missed expectations.

On the upside, luxury group LVMH rallied after its 2015 profit and revenue exceeded analysts’ expectations.

Syngenta advanced after the Swiss agrichemical company agreed to be snapped up by ChemChina in a $43bn deal.

Prudential was the standout gainer in London following heavy losses in the previous session, as Barclays said its Hong Kong sales were unlikely to take a material hit if China’s currency regulator tightens restrictions on its citizens buying insurance products from overseas.

On the macroeconomic front, Markit’s final composite purchasing managers’ index came in at 53.6, up a touch from the 'flash' estimate of 53.5 but weaker than December’s reading of 54.3.

The final Eurozone services business activity index was in line with the flash estimate at 53.6 but down from December’s 54.2.

Meanwhile, data from Eurostat showed retail sales in the Eurozone rose 0.3% in December.

The figure was in line with economists’ expectations and marked the first increase in fourth months.

On the year, sales rose 1.4%, in line with 2014 but just a touch below estimates for a 1.5% gain.

Still to come on the macroeconomic calendar, investors will eye the release of the US ADP employment report at 1315 GMT as it’s widely considered a pre-cursor to Friday’s non-farms.

“Although recent employment figures, looking just at the number of jobs, have been quite strong, the fourth quarter was a slow one in terms of US growth,” Rabobank said.

“Therefore, even if the headline jobs data comes in strong, we continue to doubt that the Fed will be able to deliver the four rate hikes currently suggested in the dot plot. Still, for the time being the US central bank seems set to remain the odd duck out, being only one to (carefully) look up.”