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European stocks close lower after BASF auto warning; Deutsche Bank falls a further 4%

Key Points
  • Markets are struggling to shrug off sharply reduced expectations that the Fed will deliver a large rate cut by the end of the month, following surprisingly strong U.S. job growth for June.
  • In corporate news, Deutsche Bank workers began to leave offices in New York, London, Sydney and Tokyo Monday as the German lender began to slash 18,000 jobs in a 7.4 billion euro ($8.3 billion) restructure.
  • International relations will also be in focus for investors after U.S. President Donald Trump attacked British Prime Minister Theresa May and her Washington ambassador on Monday.

European stocks closed lower on Tuesday as a warning of an autos slowdown from German chemicals giant BASF dragged down autos and chemicals companies.

The pan-European Stoxx 600 was provisionally down 0.5% at the closing bell, with basic resources stocks more than 2% lower. Markets were also dragged down by autos stocks, which shed nearly 1.6%, as well as the chemicals sector, which was down by more than 1% at the end of the session.

European Markets: FTSE, GDAXI, FCHI, IBEX

It came after German chemicals giant BASF warned its profit would fall well below forecasts for the second quarter of the year, with the company also predicting a slowdown in the automotive sector. BASF's stock fell more than 3% by the end of Tuesday's session. The news also impacted Bayer spin-off Covestro, which fell almost 4%, and French automotive supplier Faurecia, which tumbled 5%.

Markets are also struggling to shrug off sharply reduced expectations that the Fed will deliver a large rate cut by the end of the month, following surprisingly strong U.S. job growth for June.

Stocks were also trading lower stateside, with the Dow Jones Industrial Average and falling for a third straight day on Tuesday as investors awaited more clues on the Federal Reserve's next monetary policy move.

In corporate news, Deutsche Bank workers began to leave offices in New York, London, Sydney and Tokyo Monday as the German lender started to slash 18,000 jobs in a 7.4 billion euro ($8.3 billion) restructure. The bank's shares continued to tumble a further 4% Tuesday, while the wider European banking sector suffered losses of 0.75%.

Shares of Britain's Melrose Industries fell nearly 4%, heading for their worst day in five years. The move confounded traders, according to Reuters reports, given that no news directly impacting the company had been reported. Some reportedly speculated that BASF's warning of an auto slowdown may be a factor, since automakers are some of the major customers of Melrose's unit GKN.

Danske Bank on Monday cut its 2019 earnings forecast for the second time as a touch trading environment and higher anti-money laundering costs weighed on the embattled bank. Danske shares fell 2.5% during Tuesday's session.

British online supermarket Ocado saw its shares rise 6.7% to the top of the European blue chip index after issuing a confident outlook with its first half results.

International relations will also be in focus for investors after U.S. President Donald Trump attacked British Prime Minister Theresa May and her Washington ambassador on Monday, following the leak of confidential memos in which the diplomat called Trump's administration "uniquely dysfunctional" and "inept."

Meanwhile, Turkey proceeded with deal for Russian missile system despite US and NATO warnings. Turkey, a NATO partner, faces several consequences for accepting the Kremlin's missile system, including economic sanctions and removal from the supply chain for the F-35, America's most expensive weapons system.

Sales at British retailers rose at their slowest average pace on record over the past year as worries about Brexit weighed on consumers, a survey showed on Tuesday, according to Reuters.

Average sales growth weakened to 0.6% in the 12 months to June, the British Retail Consortium, an industry group, said, the slowest increase since it began its records in 1995.