Bad Company News Gives Reality Check to European Stock Traders

(Bloomberg) -- European equity investors dreaming of future monetary stimulus are having a rude awakening this week, thanks to bad news from companies.

The Stoxx Europe 600 dropped as much as 0.8% on Tuesday after a five-week rally spurred by expectations of looser monetary policy. The easing narrative is largely played out, and lower rates are further on the horizon, leaving stocks more vulnerable to corporate blows in a busy month for earnings.

BASF SE dragged the entire chemical sector down, as the German company’s profit warning underscored the continued impact of the U.S.-China trade war. Deutsche Bank AG plunged for a second day as investors grew increasingly skeptical of its radical restructuring plan. None of it bodes well for the upcoming earnings season.

In a classic risk-off day for equity markets, only defensive sectors were in the green, while chemical, auto and mining stocks led losses among cyclical shares.

To contact the reporter on this story: Justina Lee in London at jlee1489@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Namitha Jagadeesh, Monica Houston-Waesch

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