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Europe: Shares extend losing streak, weighed down by oils
[MILAN] European shares fell for a fourth day on Tuesday as initial support from dovish remarks by US Federal Reserve official Lael Brainard eased and a drop in crude oil prices weighed.
The Stoxx 600 index fell 1 per cent but remained above a five-week intraday low hit on Monday, while volatility , an indicator of investor nervousness, also resumed its rise to end up 4 per cent.
The pan-European index rose as much as 0.6 per cent in morning deals as investors took some comfort from Ms Brainard, who said that the Fed should avoid removing support for the US economy too quickly.
But the bounce evaporated as Wall Street opened lower and tumbling crude prices on the back of worries over a supply glut sent the sector index down more than 2.8 per cent, making it the worst performer in Europe.
Expectations mounted last week that the Fed could increase interest rates soon and the European Central Bank could slow stimulus measures, triggering a sell-off in bonds and equities.
Ms Brainard's comments tempered expectations of a September rate hike, but a tightening of Fed policy is still on the cards before the year is out.
"The equity market is not sure that a hike would be something positive because growth is still fragile, debt levels are very high and there is a lack of growth catalysts," said Michele Pedroni, fund manager at Syz Asset Management in Geneva.
"This raises the risk of market volatility," he said adding that in Europe there were no signs of a solid economic upturn.
Evidence of Europe's weak economic backdrop was provided by Italy on Tuesday as the country's economy minister warned that the country would cut its growth estimates.
Strategists at US investment bank Citigroup said that Italian stocks could be worth a buy, based on expectations that Prime Minister Matteo Renzi would emerge from a forthcoming referendum in a stronger position, provided that investors chose carefully.
Among Citigroup's favoured Italian stocks were catering company Autogrill and drinks group Campari.
Ocado, down 13.7 per cent, was the biggest faller on the Stoxx index after the British online supermarket warned of a prolonged fall in grocery prices and said that strong competition showed no sign of letting up.
But Swiss alternative asset manager Partners Group surged 8.4 per cent to a record high after results that analysts at Baader Helvea described as "stunning" and that triggered double-digit upgrades to analyst estimates.