Europe close: Oil price at 2004 lows weighs on stocks

European stocks ended the session in the red following an initial sprint higher on news that China´s CIC (China Investment Corporation) sovereign wealth fund was considering investing into German companies, tracking a poor start to trading on Wall Street as a lower oil price weighed on sentiment.

Presciently, early on in the session Markus Huber, senior analyst at Peregrine & Black, said:“Overall sentiment is positive however it needs to be seen if markets can hold on to their gains especially with oil remaining weak which is likely to put US markets under pressure once again later in the day. Trading volume is expected to be on the light side, deteriorating further the closer we are getting to Christmas."

By the close of trading, the benchmark DJ Stoxx Europe 600 index was lower by 1.13%, Germany’s DAX by another 1.04% higher and France’s CAC 40 down 1.30%.

The largest losses were to be seen in Spain, with the IBEX 35 down 3.6.2% and the yield on the country’s 10-year government bond up 12 basis points as the nation faced political uncertainty. Although Spain’s ruling conservatives won the general election, they lost their parliamentary majority, which means they could struggle to form a coalition.

“Given the exceptional nature of the situation and the lack of coalition-building experience in Spanish politics, reaching an agreement is going to be a lengthy process. With parliament in recess until around mid-January probably, we do not expect a vote of investiture to be presented before late January,” said Societe Generale.
“Looking at recent examples in Spanish regions, an even longer process cannot be ruled out.”

Meanwhile, oil prices came off earlier lows, with West Texas Intermediate down 1.21% to $34.31 a barrel - after hitting an intra-day low of $34.00, its lowest level since 2004 - and Brent crude down 2.1% to $36.13.

In corporate news, ITV was a high riser in London following a press report over the weekend that Comcast’s TV and film arm NBC Universal was considering an £11bn bid for the broadcaster.

Stock in Swedish telecom equipment maker Ericsson jumped after settling a legal dispute with Apple over mobile-device patents.

Swiss pesticide maker Syngenta was also in the black following reports that China National Chemical Corp has raised its takeover offer for the company.

Shares in French supermarket operator Casino dropped sharply even after it put out a statement hitting back at last week’s damning report by research firm Muddy Waters Research, which said it was “one of the most overvalued and misunderstood companies” it had ever come across.

On the macroeconomic front, data released earlier by Destatis showed German producer prices posted their sharpest annual drop in nearly six years in November.

Producer prices slipped 0.2% on the month and 2.5% compared with November last year.