Europe Markets

Stocks slump by the close despite oil bounce; poor earnings weigh


European equities closed sharply lower on Thursday, as a raft of weak earnings offset positive sentiment surrounding the rebound in oil prices.

The pan-European STOXX 600 finished down 1.6 percent provisionally, with all sectors closing in the red, except oil and gas.

London's FTSE 100 ended down around 1 percent, while its European counterparts, France's CAC and Germany's DAX slipped further, closing down 1.3 and 2.4 percent, respectively.

Markets closed mixed in Asia, despite Wall Street closing lower on Wednesday, after the Federal Reserve appeared to temper its expectations for U.S. economic growth. The Fed opted not to raise interest rates at its January meeting, as expected, and gave no indication that it was changing course on its rate-hiking path ahead.

But in its post-meeting statement, the Fed tweaked its view of the U.S. economy, noting that growth had slowed, business investment has moderated and inventory investment has decelerated.

The central bank said it was "closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook." The Fed also said inflation was expected to remain low in the near-term due in part to further declines in energy prices but saw the effects as transitory.

Despite the Fed, U.S. stocks opened higher Thursday, however struggled for gains around Europe's close as mixed earnings reports dragged on market performance.

Oil prices rise sharply

Brent crude and U.S. crude came off session highs, but remained sharply higher, last trading over 2 percent up, at $34.02 and $33.23 per barrel respectively, following reports that ministers from OPEC and other oil producing nations would meet in February.

The bounce in oil boosted stocks including Europe's top performer, Seadrill which finished up 17.5 percent, followed by Subsea 7, Statoil and Tullow Oil, which all closed between 6.9 and 8.7 percent.

Even Spain's Repsol, which announced Wednesday it would take a 2.9 billion euro writedown on its 2015 results, was up 5.3 percent by Europe's close.

Litigation weighs on Deutsche Bank

On the earnings front, Deutsche Bank posted a pretax loss of 1.15 billion euros ($1.25 billion) in its investment bank in the fourth quarter, sending shares to close 5.4 percent down.

Drinks giant Diageo, whose brands include Guinness and Smirnoff vodka, was off more than 1 percent after it said organic net sales in the six months ending December 31 grew 1.8 percent, on 1 percent organic volume growth.

Meanwhile, drugmaker Roche on reported full-year earnings and a dividend slightly below forecasts and said it expected sales to grow low- to mid-single digit in 2016. Shares in the firm closed sharply lower, down 3.8 percent.

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Swedish clothing retailer Hennes & Mauritz said profit decreased 11 percent to 5.53 billion Swedish kronor ($649.3 million) in the three months to the end of November, sending shares to close 4.8 percent lower. But it said it plans to open 425 new stores this fiscal year as it looks to enter new markets.

Anglo American released a mixed fourth-quarter output report with diamond production falling while iron ore increased. Investors took the news positively sending shares to close over 8.5 percent up.

Swedish home appliances firm Electrolux swung to a loss in the fourth quarter after its takeover bid for GE Appliances collapsed. But the firm pushed up its outlook for the U.S. market which helped push shares over 4 percent up.

In other business news, the U.K. government said it would postpone the sale of its shares in Lloyds Banking Group until the "turbulent markets have calmed down". Shares in the lender 1.3 percent lower by the close.

UK annual growth weakest since early 2013

The euro zone's banks took a hammering on Thursday. Italy and the European Union (EU) reached a deal on Wednesday to allow Italy's banks to sell their large holdings of so-called "non-performing loans". But the complex deal was not taken well by the markets as several Italian banks were suspended "limit down" in trade.

Banca Monte Dei Paschi Di Siena ended down some 7.9 percent while Banca Popolare di Milano was off over 9.5 percent. Banca Popolare and several other banks finished trade sharply lower.

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