European stocks down as weekend rally fails to hold

The optimism that sent European stocks rallying on Friday was short-lived. The Stoxx Europe 600 Index lost 0.5 per cent in early trading in London.

Growth concerns resurfaced after Chinese industrial companies reported profits fell the most in at least four years. Commodity producers headed for their lowest levels since 2009, and carmakers, which had their worst week since 2011, fell further 3.1 per cent, the most among industry groups.

“The economic recovery is turning out to be a bit lacklustre,” said Rosamunde Price, who helps oversee about $14 billion as chief investment strategist at Seven Investment Management in London. “People are worrying that global growth may have already passed its peak, plateaued, and is possibly turning down. Markets have just been so volatile, I’d recommend investors to shut up shop – the best thing now would be a moment of dullness.”

Emerging-market stocks fell, extending the biggest weekly drop in five weeks, as the slump in Chinese industrial companies’ profits and prospects of higher US interest rates curbed demand for riskier assets.

Malaysia’s ringgit slid to a 17-year low. A Indonesian shares slid toward a 21- month low as the rupiah weakened for a fifth day. Philippine equities decreased to a five-week low. Markets in Hong Kong, South Korea and Taiwan were closed for holidays.

Bullishness had swept through European markets on Friday, with the Stoxx 600 rallying 2.8 per cent, the most in almost a month, after comments by Federal Reserve chair Janet Yellen signaled recent market turmoil won't derail the US recovery.

Yet the gains weren’t enough to erase a second consecutive weekly decline. Europe’s benchmark measure fell 16 per cent from this year’s record in April through Friday and reached an eight- month low on Thursday.

Concerns over global growth have begun to hit corporate profits. Cuts to earnings estimates outnumber increases by the most in three years, and the pessimism could reach levels last seen during the financial crisis, based on an index tracking the changes compiled by Citigroup.

- Bloomberg