EUROPE MARKETS: Auto Makers, Italian Stocks Lead European Shares Lower

By Carla Mozee, MarketWatch

European stocks fell Thursday, facing their fourth loss in five sessions, with auto shares under pressure and Italian shares flipping down following developments surrounding the country's coalition government.

How markets are performing

The Stoxx Europe 600 Index fell 0.2% to 383.44, with the utility and financial sectors losing the most. The health care and consumer services sector, however, topped advancers. The index on Wednesday rose 0.3% (http://www.marketwatch.com/story/european-stocks-stage-recovery-but-us-china-trade-tensions-remain-2018-06-20), the first rise after three straight losses.

Italy's FTSE MIB was faring the worst, swinging lower to fall by 1.1% to 21,864.29. Germany's DAX 30 index dropped 0.8% to 12,589.21.

France's CAC 40 index declined 0.4% to 5,353.32, and Germany's DAX 30 index fell 0.8% to 12,590.73.

Spain's IBEX 35 was down 0.8% to 9,712.50, and the U.K.'s FTSE 100 held to a 0.1% rise at 7,631.10.

The euro fell to $1.1523, from $1.1577 late Wednesday in New York. Against the pound, the shared currency bought 0.8788 pence, on par with Wednesday's level.

What's driving markets

Most European bourses had logged gains when trading got underway, indicating markets were still recovering from Tuesday's slide in global equities. Stocks were rattled by an escalation in the trade fight between the U.S. and China, the world's two largest economies.

Read:China can't match Trump in a tariff fight, but it does have other weapons (http://www.marketwatch.com/story/china-cant-match-trump-in-a-tariff-fight-but-it-does-have-other-weapons-2018-06-19)

But Germany's DAX 30 benchmark wasn't able to gain much traction on Thursday, with shares of auto makers falling. Daimler AG late Wednesday unexpectedly issued a profit warning (https://www.wsj.com/articles/daimler-issues-profit-warning-as-chinese-tariffs-hit-u-s-built-suvs-1529530019?mod=mktw), saying it will be hurt by Chinese retaliatory import duties on vehicles built in the U.S. Meanwhile, Daimler, BMW AG and Volkswagen AG are supportive of a call to abolish EU-U.S. tariffs for imported cars (https://www.wsj.com/articles/germanys-largest-auto-makers-back-abolition-of-eu-u-s-car-import-tariffs-1529492027?mod=mktw), a bid to help shield the industry from a brewing trade war.

Italian stocks, meanwhile, fell into the red following reports that two euroskeptic lawmakers from Italy's League party -- Alberto Bagnai and Claudio Borghi -- have been named as the head of the Senate's finance committee and president of the House's budget and finance committee, respectively. Italian bond prices dropped following the news, sending the yield on Italy's 2-year up by 17 basis points to 0.73%, according to Tradeweb. When prices fall, debt yields rise.

The antiestablishment League and the 5 Star Movement parties have together been running Italy's government since early June.

In London, the Bank of England will release its latest monetary policy decision at 12 p.m. London time, or 7 a.m. Eastern Time. The central bank is expected to hold its key interest rate at 0.5%. It has been at that level since November, when policy makers lifted the rate for the first time in a decade.

What strategists are saying

"Early gains across European markets are rapidly slipping away ... indicating that markets are still not entirely convinced that trade wars have disappeared below the horizon. Outside of the U.S. tech sector, which seems impervious to all worries, equities have been broadly unable to hold on to their gains this week," said Chris Beauchamp, chief market analyst at IG, in a note. "[I]nvestors apparently [are] showing little desire to hold on to risk assets while the macro backdrop seems so uncertain for the time being."

Stock movers

Shares of car makers struggled, Daimler AG (DAI.XE) tumbling 4.3% to trade at prices not seen in nearly two years. Volkswagen AG (VOW.XE) dropped 2.8%, BMW AG (BMW.XE) lost 2.9%. In Milan, shares of Fiat Chrysler Automobiles NV (FCA.MI) were off 2.9%.

Also in Milan, Italian bank stocks were knocked down, with UniCredit SA (UCG.MI) lower by 1.8%. Banco BPM SpA (BAMI.MI) shed 1.7% and Unione di Banche Italiane SpA (UBI.MI) dropped 1.9%.

Dixons Carphone PLC shares (DC.LN) rose 2.9% as the electrical goods retailer posted fiscal year 2018 adjusted pretax profit in line with the company's expectations (http://www.marketwatch.com/story/dixons-carphone-profit-meets-revised-guidance-2018-06-21).

Shire PLC (SHPG) added 2.2% after the U.S. Food and Drug Administration approved the drug maker's Cinryze hereditary angioedema treatment to be made available for children aged six years and older.

(END) Dow Jones Newswires

June 21, 2018 06:59 ET (10:59 GMT)

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