More Losses for European Stocks as Italian Referendum Approaches

(Bloomberg) -- European stocks extended their first weekly decline in a month as investors awaited Italy’s referendum and U.S. jobs data gave a mixed picture of the economy to traders assessing prospects for higher interest rates.

Banks and miners posted the biggest declines among industry groups in a reversal of the moves spurred by bets of stronger economic growth after Donald Trump’s U.S. presidential win. Consumer staples, utilities and real estate shares, which had lagged the post-election rally, advanced. The Stoxx Europe 600 Index dropped 0.4 percent at the close, with the volume of shares changing hands lower than the 30-day average.

The benchmark pared a slide of as much as 1.3 percent as data showed U.S. hiring picked up in November, but rose less than previously estimated in October. The unemployment rate tumbled to a nine-year low. Traders are pricing in a 100 percent chance that Federal Reserve officials will raise rates when they meet on Dec. 14.

“I am less worried about the outcome of the Italian referendum as I think the risk is known, predictable and to some extent priced in,” said Barthelemy Debray, a fund manager at Cogefi Gestion in Paris. His firm oversees about 600 million euros ($640 million). “I expect to see a rally led by a cyclical rotation by the year-end when all political events have passed.”

Italy’s FTSE MIB Index reflected little panic in the run-up to Sunday’s vote on constitutional reform, posting the best weekly performance among developed markets. The benchmark closed little changed on Friday, erasing a drop of as much as 1.2 percent. Still, traders assessing the implications of the vote on political stability and the country’s banking crisis are paying the most in more than two years to hedge against swings in the FTSE MIB relative to the Euro Stoxx 50 Index. The VStoxx Index of euro-area swings capped its biggest weekly jump in a month.

Equities are sliding after capping their first monthly gain in three on bets that Trump’s policies will spur economic growth. The Stoxx 600 has advanced in six of the past 10 Decembers, posting an average gain of 0.8 percent.

Among stocks active today:

• Stoxx 600 banks fell for the first time in four days, after reaching a two-week high. Banco Popular Espanol SA and Unione di Banche Italiane SpA dropped at least 4.5 percent.
• Berkeley Group Holdings Plc jumped 8.5 percent after London’s biggest homebuilder reported an increase in profit and set new five-year earnings targets.

To contact the reporter on this story: Julie Edde in London at jedde2@bloomberg.net. To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Namitha Jagadeesh