Europe midday: Stocks in the red as miners, banks slump
European stocks fell on Tuesday as weak Chinese data dented basic resources and bank earnings disappointed.
At midday, the benchmark Stoxx Europe 600 index was down 1.7%, Germany’s DAX was 1.8% weaker and France’s CAC was 1.6% lower.
At the same time, oil prices retreated amid concerns about oversupply. West Texas Intermediate was down 1% to $44.35 a barrel while Brent crude was 0.7% weaker at $45.49.
“Mixed to disappointing corporate earnings news out of Europe this morning and somewhat weaker economic data out of China are spoiling the overall appetite for stocks,” said Markus Huber, a trader at City of London Markets.
“Having been spoiled of late by consistently better-than-expected economic readings out of China today's weaker manufacturing data might be pointing towards that the rebound in economic activity could be less pronounced than previously hoped. Furthermore despite QE, low oil prices and a weak Euro, corporate earnings within the Euro-zone seem to struggle as overall slowing global growth is taking a heavy toll.”
Earlier, the China Caixin manufacturing PMI fell to 49.4 in April from 49.7 in March, missing economists’ expectations for a reading of 49.9. A reading below 50 indicates contraction.
Stocks in the basic resources sector, where demand is heavily dependent on China, took a hit, with the Stoxx 600 sub-index down 5.1%.
“These numbers support our contention that the current resources rally has been mainly driven by speculation and is overdone, setting the stage for a classic ‘Sell in May’ event - albeit actual timing is likely to be a bit more fluid than that appellation might suggest,” said broker Shore Capital.
In corporate news, Commerzbank slid after it said profit in the first quarter halved, with net income down to €163m from €388m the year before.
UBS was under pressure as the Swiss bank’s first-quarter pre-tax profit slumped due to weakness in the wealth management business.
HSBC reversed earlier gains to trade lower after the bank reported a 14% drop in first-quarter profit.
Aberdeen Asset Management slumped after it posted a big decline in first-half profit as the money manager took a hit from emerging-market weakness.
BMW skidded after its first-quarter earnings before interest and tax missed expectations, while Lufthansa flew lower after announcing it will slow the pace of its growth plans this year, as it reported a net loss for the first quarter.
On the upside, BNP Paribas rallied as it posted an increase in first-quarter net profit, while RSA Insurance gained ground after an upgrade by Barclays.
In macroeconomic news, data from Eurostat showed producer prices in the Eurozone rose 0.3% on the month in March versus economists’ expectations for a 0.1% increase and a 0.7% drop in February.
On a year-on-year basis, prices were down 4.1% compared with forecasts for a 4.3%.
Dennis de Jong, managing director at UFX.com, said: “Following yesterday’s uptick in Markit manufacturing data, ECB president Mario Draghi would have been hoping for a better result in today’s producer price index.
“The next seven weeks will be a huge test for the euro, culminating with a vote on the UK’s membership of the European Union, which is poised precariously on a knife edge."