Tags: Europe | stocks | ECB | Draghi

Europe Stocks Slump Most Since March After ECB Bond-Buying Plan

Thursday, 02 October 2014 02:33 PM

European stocks plunged the most since March on concern the European Central Bank’s asset-buying program announced today won’t be enough to boost inflation and revive the economy.

The Stoxx Europe 600 Index retreated 2.2 percent to 332.64, its lowest level since Aug. 15, at 4:30 p.m. in London, with all its 19 industry groups down. Gauges of oil and gas companies and banks fell the most, with Italian and Spanish lenders leading the losses. Today’s decline brings the Stoxx 600 down 4.7 percent from an almost six-year high on Sept. 4.

ECB President Mario Draghi said it will buy assets for at least two years, starting covered-bonds purchases this month and asset-backed securities this quarter. He signaled as much as 1 trillion euros ($1.3 trillion) in assets could be added to the central bank’s balance sheet.

“Draghi did not bring out the big bazooka that the market had hoped for,” Peter Garnry, head of equity strategy at Saxo Bank A/S in Hellerup, Denmark, said by telephone. “Sentiment was already tilted to the downside on economic data and we are seeing an increasing likelihood of deflationary pressures. It seems that the market is interpreting Draghi’s words negatively and as not providing the salvation that was hoped for.”

The ECB has been battling the threat of deflation. Since June, the central bank has cut interest rates twice and announced a range of measures such as loans to banks aimed at boosting credit to the real economy. It left its interest rates unchanged today after unexpectedly cutting them last month.

Proof Needed

“It’s tough to sell a loan program for banks to lend out to the economy, when the current outlook is described weak,” Guillermo Hernandez Sampere, who helps manage about 130 million euros ($168 million) at Eppstein, Germany-based MPPM EK. “Stimulus has to be proven before a market is convinced.”

Oil and gas companies slumped 3.8 percent as a group as West Texas Intermediate crude fell below $90 for the first time in 17 months. Norwegian oil-services company Aker Solutions ASA dropped 7.6 percent to 56.85 kroner.

European lenders lost 3.1 percent. Banco Popolare SC slumped 6.1 percent to 11.08 euros, and UniCredit SpA fell 4.9 percent to 6 euros. Banco Popular Espanol SA declined 5.3 percent to 4.63 euros.

Italy’s FTSE MIB Index dropped 3.8 percent, and Spain’s IBEX 35 Index retreated 2.4 percent. Portugal’s PSI 20 Index fell 3 percent.

Rocket Internet

Rocket Internet AG lost 12 percent to 37.51 euros on its first day of trading. The Berlin-based company known for replicating businesses from Groupon Inc. to Airbnb Inc. completed the biggest initial public offering in Germany since 2007. It priced the sale at the top end of its range.

Shares of online apparel retailer Zalando SE sank 15 percent to 18.34 euros on their second day of trading.

Hochtief AG jumped 6.6 percent to 56.49 euros. Germany’s biggest builder said it will repurchase as much as 10 percent of its share capital.

Societe Television Francaise 1 climbed 1.4 percent to 10.86 euros after UBS AG recommended buying the shares. The brokerage said French advertising trends are stronger than anticipated. It raised its rating from hold and increased its 12-month price estimate to 13.30 euros from 12.30 euros.

The volume of Stoxx 600 shares changing hands today was 48 percent greater than the 30-day average, according to data compiled by Bloomberg.

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European stocks plunged the most since March on concern the European Central Bank's asset-buying program announced today won't be enough to boost inflation and revive the economy.
Europe, stocks, ECB, Draghi
Thursday, 02 October 2014 02:33 PM
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