Energy Producers Lead Europe Stocks Down as Spain’s IBEX 35 Fall

20 Jan 2016 | Author: | No comments yet »

Energy Producers Lead Europe Stocks Down as Spain’s IBEX 35 Fall.

The Stoxx Europe 600 Index dropped 1.1 percent at 4:35 p.m. in London, erasing an advance of as much as 0.8 percent as energy companies declined with oil and the euro strengthened.European stocks rose Monday, but Spanish stocks slid in the wake of the country’s general election, which left no party as a clear winner in the fourth-largest economy in the eurozone. Spain’s IBEX 35 Index tumbled percent, set for its biggest slump in three months, after the nation’s prime minister lost his majority in an inconclusive weekend election. “People are reducing risk into year-end,” said Stewart Richardson, chief investment officer at RMG Wealth Management in London. “We had a lot of hype in the market post Fed and a positive reaction to that, so now the market is correcting. The messy outcome of Spain’s general election means the start of 2016 should see Italy remain the favored play in Southern European government bonds.

Political uncertainty in Spain is not very supportive.” The Stoxx 600 slid after posting its best week in a month, thanks to a jump in exporters and financial companies following the first Federal Reserve interest-rate increase in almost a decade. The pan-European index ended last week higher by 1.5%, but ended Friday’s daily session down 1% as stocks lost grip of their Federal Reserve-inspired gains.

The gauge traded at 15.7 times estimated earnings on Friday, less than at its April peak and lower than the valuation for the Standard & Poor’s 500 Index. Current prime minister Mariano Rajoy, as leader of the largest party following the vote, will get the first chance to form a government, but with insufficient seats to form a majority (even under a coalition with fourth-place Ciudadanos), it is likely that negotiations on a new government will be difficult. It marks the end of two-party politics: the Popular Party and the Socialists gained just over half the votes, down from nearly three-quarters in 2011. The index had fallen by more than 3% early Monday after Sunday’s general election resulted in Spain’s ruling Popular Party losing its parliamentary majority. The new forces of left-wing Podemos and centrist Ciudadanos have won sizable numbers of seats, but there looks to be little chance of a stable government being formed quickly.

Mariano Rajoy, Spain’s prime minister, may “have to go into coalition with at least one leftist party, which will likely cause huge problems in the continued implementation of austerity and reforms needed to fall in line with eurozone rules”, said Craig Erlam, senior market analyst at Oanda, in a note. “As a result, we could now be facing an era [of] political paralysis and instability in Spain unless a more likely coalition of the left is formed, which again could create an even bigger headache for eurozone leaders insisting on fiscal responsibility,” he said. Brent crude slumped to the lowest level since 2004 with futures for February settlement on the London-based ICE Futures Europe exchange falling as low as $36.05 a barrel before trading at $36.43 at 10:52 a.m.

Movers: European oil shares, which have been hurt in recent sessions, were mostly higher Monday, hanging onto gains as oil prices CLG6, -1.33% LCOG6, -2.11% came under renewed pressure and traded at fresh multiyear lows. Today, banks contributed the most to the stock-market decline, with Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA down more than 4 percent, while CaixaBank SA fell the most in two years. The elections have been weighing on Spanish shares this year, sending the IBEX 35 down 5.5 percent through Friday — one of the worst performances in western Europe. The French supermarket operator rejected accusations related to accounting practices leveled by short-selling firm Muddy Waters in a lengthy response filed to a regulator Monday.

Among some of the companies rising today, Ericsson AB climbed 2.9 percent after the company said it settled a legal dispute over mobile-device patents with Apple Inc., reaching a licensing agreement that is set to result in more cooperation between the two technology-industry giants. Data: German producer prices fell 2.5% year-over-year in November, the sharpest annual drop in almost six years, as energy prices lagged, the Federal Statistical Office said. With the year almost over, investors are looking for the best trades of 2016 and luckily for them, there seems to be broad agreement on where bond funds need to be in the next 12 months. BlackRock Inc., Pacific Investment Management Co. and Prudential Financial Inc. all say debt from Europe’s less-creditworthy borrowers such as Portugal, Italy and Greece is poised to excel once again as the European Central Bank extends its quantitative easing program. Wage restraint is good news for markets but harder to stomach for voters: since 2013 the average year-over-year increase in wages registered in collective bargaining is 0.6%, versus 3% in the period between 2000 and 2008, Barclays BCS 0.31 % notes.

China’s leaders intend make monetary policy more “flexible,” according to a statement from a meeting of top economic policymakers as the government prepares more stimulus to support its flagging economy. In what may be a major shift at the People’s Bank of China, the central bank has been surveying the country’s lenders on the possibility of removing its benchmark deposit and lending rates. Ten-year Italian yields have fallen this year, while those for Spain have risen even as Italy faces a larger debt burden, the need to carry out deeper reforms and a less dynamic outlook.

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