Europe Stocks Halt 2-Day Rout as Banks Pare Drop After U.S. Data

(Bloomberg) -- European stocks halted a selloff after better-than-forecast U.S. economic data helped recoup most intraday losses in bank shares.

The Stoxx Europe 600 Index added less than 0.1 percent at the close, wiping out a drop of as much as 0.7 percent after data showed American consumer confidence in September rose to a 2007 high, while the services industry expanded more than estimated. Europe’s equity gauge rose 0.7 percent earlier in the session, following a two-day slide.

A gauge of Stoxx 600 banks was down 0.2 percent, after slipping as much as 1.3 percent. Commerzbank AG fell 2.2 percent after a report it plans to cut jobs and suspend dividend payments. Credit Suisse Group AG slid 3.3 percent after its chief said the lender is mulling further cost cuts at the global markets unit that posted a loss earlier this year. Deutsche Bank AG was unchanged at a record low.

“Markets are nervous, but panic levels haven’t been triggered yet,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees $260 million. “Some European financials are really not in a very healthy shape, and the market is aware of it. We had a summer during which volatility stayed at the beach, but now we are back in the game and we have to learn to deal with it.”

The Stoxx 600 fell the most since July yesterday amid lender losses spurred by worries about Deutsche Bank’s capital buffers, while a gauge of euro-area swings surged the most since January. The VStoxx Index extended its increase today, up 2.2 percent, after last week closing at its lowest since 2014 amid optimism over monetary policy.

As September draws to a close, European stocks are heading for their first monthly decline in three. Last week’s bullishness prompted by central-bank updates wasn’t enough to erase an earlier rout that shattered the summer’s calm. Fresh declines this week are also dragging on the Stoxx 600, which is down 1 percent this month.

With the Federal Reserve’s decision to keep rates unchanged in September, traders will turn their attention to the run-up to November’s U.S. election, according to Hernandez Sampere. Financial markets judged the first American presidential debate that took place yesterday in favor of Democrat Hillary Clinton, as U.S. equity-index futures reversed losses after the event, while haven assets including gold and the yen fell.

“Some people are drawing a very ugly picture in case Mr. Trump wins,” Hernandez Sampere said. “The market reaction was quite clearly in favor of Ms. Clinton, but the people that were in favor of Trump will not change their opinions.”

Among shares active on corporate news, Volkswagen AG dropped 2.2 percent as people familiar with the matter said the U.S. Justice Department is assessing how big a penalty it can extract from the company over emissions-cheating without putting it out of business. Porsche Holding SE, which owns the majority of VW shares, slid 2 percent.

Energy shares were the biggest Stoxx 600 losers, following crude lower as Iran said it’s unwilling to freeze output at current levels, damping expectations for an OPEC agreement when the group meets tomorrow. Tullow Oil Plc and Royal Dutch Shell Plc declined at least 1.5 percent.

Wolseley Plc dropped 1.3 percent after the British distributor of building materials and bathroom supplies reported slower comparable quarterly revenue growth, citing uncertainty in the economic outlook.

Anheuser-Busch InBev NV gained 1 percent after people familiar with the matter said most SABMiller Plc investors voting by proxy support the Belgian brewer’s takeover offer, before shareholders meet Wednesday.

To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net, Aleksandra Gjorgievska in London at agjorgievska@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net, Namitha Jagadeesh