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Europe: Shares dragged lower by retailers, resource stocks
[LONDON] European shares fell on Thursday as sagging oil prices hit basic resources stocks, while retailers slipped after H&M missed expectations and UK data showed consumers are feeling the impact of rising inflation.
Crude prices wallowed near a six-week low as doubts grew over Opec's ability to cut oil supplies, weighing on stocks worldwide and adding to worries over the resilience of sectors most geared to economic growth.
The pan-European Stoxx 600 benchmark fell to its lowest since April 24 before paring some losses and ended down 0.4 per cent. Euro zone stocks and blue-chips fell 0.6 per cent.
Basic resource stocks fell 1.7 per cent while energy stocks fell 0.6 per cent.
"Numbers showing the supply-demand imbalance are pushing commodities to the downside," said David Stubbs, global market strategist at JP Morgan Asset Management.
"Opec has been unable to control global production, and the situation in Qatar is showing it is not very united," he added.
Large brokers have been turning away from cyclicals and into defensives lately as they see strong momentum in European data fading, removing a catalyst for the sectors most sensitive to growth.
Energy stocks are the worst-performing in Europe this year, and the only sector to have fallen year-to-date.
Retailers were also under significant pressure.
Europe's retail index fell 2.2 per cent, the biggest sectoral faller in Europe, and Britain's mid-caps suffered their sharpest fall this year, as investors grew more skittish about the resilience of consumer spending in Britain, where is inflation is climbing due largely to a weak pound.
Retail sales fell more sharply than expected in May, adding to multiplying signs of inflation depressing consumer spending, the engine of the UK economy.
"I don't think this is a surprise to anyone in terms of the narrative about how weak and stretched the consumer is and will be for the next quarters," said Mr Stubbs.
"If retail sales are weak then the pie is contracting and someone is going to get hammered. Those that are unable to deal with that are going to see a much weaker bottom line," he added.
DFS Furniture plummeted 20 per cent on Britain's small-cap index after a profit warning which it blamed on a dip in demand, with significant declines in store footfall.
In Europe, H&M shares fell 5.5 per cent after May sales missed forecasts, adding to a string of softer figures from the Swedish fashion retailer, which blamed tough trading conditions.
Petrofac shares were a rare bright spot on falling markets, up 3.9 per cent, after a Jefferies upgrade to buy.
Telecoms firm Proximus fell 3.6 per cent after suffering a cut to 'sell' from Citi.
Meanwhile stocks in Athens inched 0.15 per cent lower as its international lenders prepared on Thursday to unblock as much as 8.5 billion euros (S$13.11 billion) in loans that Athens desperately needs next month to pay its bills .