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Europe close: Stocks drop amid rout in Basic Resources, drop in Oil and Gas

By Alexander Bueso

Date: Friday 09 Nov 2018

Europe close: Stocks drop amid rout in Basic Resources, drop in Oil and Gas

(Sharecast News) - Stocks across the Continent finished the session sporting significant losses on the back of a continued slide in oil prices and, according to some market observers, reports that Beijing will set quotas for the country's lenders to lend to the private sector.
The US central bank's reiteration overnight that it would continue on a path of gradual interest rate hikes, while expected, was also said to be weighing on sentiment.

"European markets are following their Asian counterparts lower this morning, as a hawkish Fed quelled bullish sentiment seen throughout much of the week. The dollar has been the centre of much of the post-Fed price action, with recent declines in the greenback reversing overnight," said Chris Beauchamp at IG.

By the end of trading, Milan's FTSE Mibtel was down by 0.88% or 171.03 points to 19,258.11, alongside a drop of 0.48% or 24.70 points to 5,106.75 for the Cac-40 but a gain of 0.02% or 1.84 points to 11,529.16 for the German Dax, with the latter having managed to reverse early losses and clamber higher.

In parallel, front month Brent crude oil futures dropped 0.9% to $70 a barrel on the ICE, having apparently lost a key near-term level of technical support at $70.76 per barrel ahead of a meeting of OPEC member countries and their allies to decide on policy.

Weakness in crude prices was reflected at the sector level, with the Stoxx 600's Oil&Gas sector sub-index trading down by 1.40% 331.82 and that for Basic Resources declining by 3.41% to 427.12.

As an aside, according to strategists at Bank of America-Merrill Lynch, the more than 500 investors and 200-plus corporates who took part at their conference in Beijing this week expected a trade deal with the US to materialise in the first quarter of 2019.

Nevertheless, the rally in Chinese bonds, the only major bond market that was doing so, might be signaling a "big" slowdown in the first quarter and a further depreciation in the Chinese yuan, BofA-ML said.

On the European economic front meanwhile, the data was rather downbeat with INSEE reporting that French industrial production fell by 1.8% month-on-month in September (consensus: -0.3%), with a 2.1% drop in manufacturing output the main cause.

Over in the corporate space, shares of steel-maker Thyssen Krupp traded down by 3.51% to €17.32 after the firm cut its outlook for profits, referencing the potential impact of an investigation into price fixing, weakness at its elevator unit and delays in shipments as a result of low water levels in the Rhine river.

Earlier in the session, Thyssen Krupp's stock had plumeted by as much as 12%.

Telecom Italia stock was also lower after the outfit dialed back on its plans to pare its debt pile and unveiled plans to write-down the value of its assets by roughly €2.0bn.

Spanish lender BBVA was also in the headlines a day after Mexico's new president, Andrés Manuel López Obrador, unveiled an initiative to supress bans' fees for a range of services provided to customers.

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