EUROPE MARKETS: Dashed Hopes For Oil Deal Help Pull European Stocks Lower

By Carla Mozee, MarketWatch

Eurozone inflation rises, GDP expands

European stocks slipped Monday, as lower oil prices weighed on energy shares and as the market failed to find relief in fresh economic growth and inflation data.

The Stoxx Europe 600 index shed 0.4% to 339.53, with oil and gas and financial shares among those losing ground. But gains for basic materials and consumer stocks helped limit losses on the pan-European benchmark.

The index was on track to finish the month of October lower by 1%, which would be the largest monthly loss since a 5.1% slide in June, in the aftermath of the Brexit vote.

Energy shares on Monday fell as oil prices lost more than 1%. Talks held over the weekend between major oil producers failed to deliver final plans to implement an output cut (http://www.marketwatch.com/story/opec-official-says-output-reduction-plan-has-taken-far-too-long-2016-10-29).

Shares of oil company Tullow Oil (TLW.LN) fell 2%, OMV AG lost 0.8%, and Italy's Eni SpA (ENI.MI) moved down 1.4%. Oilfield services company John Wood Group PLC (WG.LN) gave up 0.3%.

Data in focus: Investors started the session with downbeat data from Germany, the eurozone's largest economy, where retail sales unexpectedly sank 1.4% in September (http://www.marketwatch.com/story/german-retail-sales-plummet-in-september-2016-10-31-34853454).

Then Eurostat, the eurozone's statistics agency, issued two major economic reports. Third-quarter gross domestic product expanded 0.3% from the previous quarter, (http://www.marketwatch.com/story/eurozone-logs-modest-quarterly-growth-of-03-2016-10-31) meeting a FactSet analyst consensus forecast. Meanwhile, consumer prices rose 0.5% in October over year ago, also meeting expectations. That was the highest level since June 2014.

But core inflation, which strips out energy, food, alcohol and tobacco prices, remained at 0.8% in October for the eurozone.

"We believe that the appreciation of the euro since spring 2015 (by some 8-9% in trade-weighted terms) is behind the recent re-weakness in core goods dynamics. This compounds the drags from weak wage growth, negative output gap and low pricing power," said Citi economist Giada Giani in a research note.

"The recent softening of the euro and rising commodity prices should prevent core inflation from moving lower from current levels in coming months, in our view," she added.

The euro was little changed immediately after the inflation and GDP reports. It eventually moved down to $1.0949, compared with $1.0987 late Friday in New York.

Political winds: Central banks will be in focus this week, with the Bank of Japan, the Reserve Bank of Australia, the Federal Reserve and the Bank of England "all meeting for some important rate decisions, at a time when bond markets appear to be starting to price in higher inflation," wrote Michael Hewson, chief market analyst at CMC Markets UK.

Read:Here's why bond yields are rising around the world (http://www.marketwatch.com/story/heres-why-bond-yields-are-rising-around-the-world-2016-10-27)

Thursday's Bank of England will feature the bank's quarterly inflation report. As well, investors will be eager hear from Bank of England Gov. Mark Carney on will say whether he plans on remaining in his position through 2021 or leave in 2018, as some newspapers reported over the weekend.

See:Carney to defy Brexit critics and stay on at BOE: report (http://www.marketwatch.com/story/bank-of-england-boss-mark-carney-ready-to-stay-on-until-2021-report-2016-10-31)

Meanwhile, analysts are saying the U.S. Federal Bureau of Investigation's renewed probe of emails (http://www.marketwatch.com/story/wobbles-ahead-and-dollar-volatility-what-analysts-expect-after-the-fbi-bombshell-2016-10-31) possibly linked to Democratic presidential candidate Hillary Clinton will continue to unsettle markets and the U.S. dollar .

The investigation "is unlikely to derail Clinton, who remains the front runner in the election campaign but volatility is benefitting in the near term," said Richard Perry, market analyst at Hantec Markets.

Movers: Sika AG shares (SIK.EB) jumped 15% after a Swiss court sided with management (http://www.marketwatch.com/story/saint-gobain-gets-antitrust-approval-for-sika-deal-2015-12-07-34851229) at the construction and automotive chemicals maker in a dispute with its founding family. The family wants to sell its stake to French rival Saint-Gobain SA (SGO.FR) . Saint-Gobain shares shed 0.5%.

Hexagon AB (HEXA-B.SK) shares dropped 7.8% following news the technology group's Chief Executive Ola Rollen is under investigation in Norway for insider trading from personal investments not related to Hexagon.

WPP PLC (WPP.LN) shares rose 3.8% after the U.K.-based advertising giant posted third-quarter revenue growth that was above expectations (http://www.marketwatch.com/story/wpp-revenue-growth-beats-expectations-2016-10-31-34853439). But it also said business in the U.K. slowed after "perhaps the first signs of Brexit anxiety."

Indexes: Germany's DAX 30 index gave up 0.3% to 10,664.00, while France's CAC 40 moved down 0.6% to 4,518.26. Spain's IBEX 35 fell 0.5% to 9,152.70.

The U.K.'s FTSE 100 index was off 0.5% at 6,964.31. The pound bought $1.2167 compared with $1.2186 late Friday.

(END) Dow Jones Newswires

October 31, 2016 08:58 ET (12:58 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.