ROME: European stocks have pulled back, with London penalised as sliding metals and oil prices hurt heavyweight mining and energy companies.
Eurozone indices were down also on Monday despite fairly positive regional data
Meanwhile growing confidence that the US will raise interest rates next month boosted the US dollar, in turn hurting the euro which struck a seven-month low also on speculation of more stimulus from the European Central Bank (ECB).
“After a very positive stretch for equity markets last week, a sharp fall in commodity prices has sent the UK market lower,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.
“With oil and industrial metals prices all sharply down on fears of oversupply, reduced demand and a strengthening US dollar, the commodity-heavy FTSE 100 has nowhere to hide.”
London’s benchmark FTSE 100 index finished the day down 0.5 per cent, Frankfurt shed 0.3 per cent and Paris gave up 0.4 per cent.
It came as New York oil prices traded around the $US42-a-barrel level. Nickel continued to plunge and gold declined – helping push Bloomberg’s Commodity Index to a 16-year low.
The declines weighed on mining and energy majors, with shares in miner Antofagasta dropping 2.3 per cent, commodities giant Glencore falling 2.0 per cent and Royal Dutch Shell’s A share losing 0.5 per cent.
Traders in Europe were reacting also to news that eurozone business activity hit a four-and-a-half year high in November, helping create much-needed jobs in a broad-based upturn despite the impact on France of the Paris attacks.
Data monitoring company Markit said its closely watched Composite Purchasing Managers Index rose to 54.4 points from 53.9 points in October, putting it well above the 50-point boom-or-bust line.
“While the ECB will undoubtedly take some encouragement and comfort from the improved eurozone purchasing managers’ surveys for November, they will unlikely deter the bank from delivering more stimulus in December especially as prices charged continued to fall,” Howard Archer, chief economist on Europe at research group IHS Economics, said.
Craig Erlam, senior analyst at Oanda, said the PMI data “points to slightly stronger growth in the fourth quarter” but added “I don’t think it will dissuade the ECB from easing monetary policy at the meeting next month.”
