European stock rally fizzles out

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European equities have pulled back, shedding some of last week’s bumper gains as investors took profits and digested weaker-than-expected data, dealers say.

The euro also tumbled to $US1.2440 in Asian deals, touching the lowest level since August 2012 on expectations of rising US interest rates.

London’s benchmark FTSE 100 index gave up 0.89 per cent to end Monday at 6,487.97 points, while in Paris the CAC 40 fell 0.92 per cent to 4,194.03 points and in Frankfurt the DAX 30 index shed 0.81 per cent to 9,251.70 points.

Milan tumbled 2.1 per cent after shares in Italy’s third-largest bank, Banca Monte dei Paschi di Siena, had to be suspended for excessive losses after announcing it was considering a capital hike.

“Stocks traded lower in Europe thanks to disappointing manufacturing data that reminded investors that despite global central bank stimulus, the European economy is still struggling to recover from the eurozone crisis,” analyst Jasper Lawler at CMC Markets UK said.

Activity in the eurozone’s manufacturing sector nudged higher in October as businesses cut prices, data showed Monday, but the gain was less than originally estimated.

The headline measure from data firm Markit’s monthly survey of purchasing managers at manufacturers rose to 50.6 from 50.3 in September.

However, the final measure was slightly below the preliminary estimate of 50.7 released in October.

A reading above 50.0 for the Purchasing Managers Index indicates an expansion in activity, while a reading below that level signals a contraction.

Over the weekend, China’s official PMI came in at 50.8 in October compared with 51.1 in September, the government said on Saturday, raising concerns about slowing growth in the world’s second-largest economy and top energy consumer.

“Sentiment has taken a knock from the weaker PMI figures out of China and the eurozone,” Forex.com analyst Fawad Razaqzada said.

Global equities had surged on Friday as the Bank of Japan’s surprise stimulus sent investors on a buying spree.

Markets from Asia to Europe ended last week on a positive note, as the BOJ’s decision countered the gloom caused by the end of the Federal Reserve’s massive monetary easing program.

However, Asian markets diverged on Monday as traders took a breather after last week’s rally, but Shanghai hit a 21-month high on hopes of Chinese stimulus measures after weak manufacturing data.

US stocks were hesitant, with even a rebound in the US manufacturing sector last month failing to give a positive direction to trading.

In midday trading the Dow Jones Industrial Average was down 0.17 per cent at 17,360.93 points .

The broad-based S&P 500 added 0.10 per cent to 2,020.06, while the tech-rich Nasdaq Composite rose 0.35 per cent to 4,647.05.

In company news, Publicis shares sank 2.3 per cent in Paris, after the French advertising agency snapped up US digital marketing specialists Sapient in a $US3.7 billion ($4.0bn) deal.

Publicis, whose attempts to merge with US group Omnicom and create the world’s biggest advertising company failed earlier this year, said it had agreed to pay $US25 a share for Boston-based Sapient.

In London, HSBC shares sank 1.8 per cent after the bank set aside $US378 million for a potential fine in Britain to settle allegations of foreign exchange market rigging.

The Asia-focused lender said in a results statement that it had made a “provision of $US378m relating to the estimated liability in connection with the ongoing foreign exchange investigation” by Britain’s Financial Conduct Authority (FCA) regulator.

The news comes after rivals Barclays and Royal Bank of Scotland (RBS) last week made huge provisions for possible costs and penalties arising from several probes into suspected price-rigging in the foreign exchange market.

On Monday, Barclays stock sank 1.6 per cent and RBS fell 2.0 per cent.

In foreign exchange deals on Monday, the euro later stood at $US1.2491, down from $US1.2525 in New York late on Friday.

The euro fell to 78.19 British pence from 78.29 pence. The British pound eased to $US1.5973 from $US1.5997 on Friday.

On the London Bullion Market, gold prices rose to $US1,167.75 an ounce, from $US1,164.25 an ounce on Friday.

The precious metal had slumped on Friday to a four-year low of $US1,661.16 – the lowest level since July 2010 – on the back of the weak dollar.

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