By Carla Mozee, MarketWatch
European stocks ended with a small loss Wednesday, the first pullback in three sessions, as bank shares declined.
The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.42% searched for firm direction for much of the session, then ended lower by 0.1% at 340.77. The basic materials , oil and gas /zigman2/quotes/210599627/delayed XX:SXEP -0.26% , industrial and technology sectors were the only sectors to finish higher.
“Markets in Europe have again struggled to keep track of record breaking U.S. markets, rolling over into the afternoon session on the back of a selloff in bond markets and a sharp rise in the U.S. dollar,” said Michael Hewson, chief market analyst at CMC Markets UK, in a note.
The financials sector fell, weighed in part by losses in bank stocks. The Stoxx Europe 600 Bank Index /zigman2/quotes/210599339/delayed XX:SX7P +0.75% shed 0.2%.
“The weakness in the banking sector continues to act as a drag on European share markets despite improving economic data from France and Germany,” he said.
“It could be that European markets are starting to suffer on the basis that European governments remain unwilling to act in a manner to support their own economies in the same way that the U.S. government and now the U.K. government appear willing to do so to theirs, as central bank policy continues to run out of road,” Hewson wrote.
In the banking group, Commerzbank AG /zigman2/quotes/200193353/delayed DE:CBK +1.40% declined 1.7%, Bankia SA gave up 2% and Credit Agricole SA /zigman2/quotes/209264506/delayed FR:ACA +0.86% ended 0.7% lower.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.0559% fell to $1.0559, trading at levels not seen in about a year, from $1.0627 late Tuesday. The U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.19% surged to a 13-year high Thursday following upbeat economic data and ahead of minutes from the Federal Reserve’s last policy meeting.
The euro was unable to gain traction after preliminary, or flash, data released Thursday showed eurozone business activity improved in November. IHS Markit said its composite Purchasing Managers Index for manufacturers and service providers rose to 54.1, its highest level since December of last year and above the 53.4 consensus forecast of economists polled by The Wall Street Journal.
Italy: Most Italian bank shares, however, managed to escape losses logged earlier Wednesday. Investors “remain fixed on the upcoming Italian referendum on Dec. 4, and we are seeing a sharp increase in orders targeting a weaker euro,” said Nawaz Ali, currency strategist at Western Union Business, in a note.
Shares of Banca Popolare di Milano turned higher to close up 1.4% and Banco Popolare Societa Cooperativa rose 1.2% but Mediobanca SpA /zigman2/quotes/206067777/delayed IT:MB -0.75% moved 1.5% lower, and UniCredit SpA /zigman2/quotes/200769686/delayed IT:UCG +0.45% shed 0.5%.
Italy’s FTSE MIB flipped higher to end up 0.1% at 16,532.26.
Brexit budget: The yield on the U.K.’s 10-year gilt /zigman2/quotes/211347177/realtime BX:TMBMKGB-10Y -2.68% rose 5 basis points to 1.44% as investors considered potential inflationary pressures stemming from the British government’s spending plans. U.K. Chancellor of the Exchequer Philip Hammond on Thursday talked about the Conservative government’s budget for the first time since the U.K. voted to leave the European Union in a June referendum.
The U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.27% closed down 2 points at 6,917.71,weighed as housing and retail shares. But the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.1983% eventually rose, buying $1.24548 versus $1.2417 late Tuesday.
In other developments Wednesday, Reuters reported that the European Central Bank is considering lending more of its debt in a move to reduce scarcity in the market. The yield on the 10-year German bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -3.20% rose 2 basis points to 0.256%.
Movers: Assicurazioni Generali SpA /zigman2/quotes/203793198/delayed IT:G -1.98% shares ended 3% lower. The Italian insurance company said it will accelerate a strategic turnaround it launched last year, by exiting unprofitable businesses and cutting operating costs.
Porsche shares /zigman2/quotes/202769371/delayed XE:PAH3 +0.14% rose 2.1% and Volkswagen AG /zigman2/quotes/204309985/delayed DE:VOW3 +0.33% rose 2% after Goldman Sachs raised its ratings on the auto makers to buy from sell.
For Volkswagen, “‘Dieselgate’ liabilities now look increasingly quantifiable, and the ‘Future Pact’ with employees is now in place, paving the way for addressing the key issue of weak VW brand profitability,” Goldman analyst Stefan Burgstaller wrote in a research note issued Wednesday about the European auto industry.
But Daimler AG fell 1.6% as Goldman cut its rating to neutral from buy.
Indexes: Germany’s DAX 30 /zigman2/quotes/210597999/delayed DX:DAX +1.62% fell 0.5% to 10,662.44, while France’s CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 +1.64% shed 0.4% to end at 4,529.21. Spain’s IBEX 35 /zigman2/quotes/210597995/delayed XX:IBEX +0.50% ended down 0.3% at 8,627.50.
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