Europe Stocks Fall as Traders Doubt Rally Can Last; GEA Slumps

(Bloomberg) -- European equities dropped at the open as almost all sectors retreated amid investor concerns that the stock rally is running out of steam and as some corporate earnings disappointed.

The Stoxx Europe 600 Index retreated 0.3 percent. Airbus SE declined 1.1 percent after the A380 superjumbo was dealt another blow as Qantas Airways Ltd. formally canceled an outstanding order. German engineering firm GEA Group AG slumped 12 percent after forecasting a profit decline for this year. France’s Societe Generale SA gained after fourth-quarter trading revenue beat analyst estimates. Pernod Ricard SA also climbed 2.6 percent after raising full-year earnings forecast on Chinese demand.

European equities have been enjoying a stellar start to the year, nearly closing in on the rebound in the S&P 500 Index. Although the earnings season has brought many disappointments, this didn’t halt the gains because expectations for profits were already low. Now that the equity charge is in its second month, investors are starting to look for fresh impetus and wonder if the rally is nearing its end. European economic data remains a source of frustration after German industrial output unexpectedly declined for a fourth month in December.

“The market is simply a bit overbought after the strong January rally,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg in Frankfurt. “European economic data is still lackluster and company reporting is also not enthusiastic. Investors are in a wait-and-see mode. Political risks are still plenty and most investors expect a setback."

“Data in Europe is still disappointing, which is troubling,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “We keep thinking that pessimism about Europe is discounted and priced, but the data keeps getting worse.”

To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon

©2019 Bloomberg L.P.