European Markets Pull Back As Risk Appetite Wanes

(RTTNews) - The European markets traded in negative territory of the majority of Monday's session and finished the day with moderate losses. Investors were in a cautious mood ahead of the European Central Bank policy decision on Thursday. Risk appetite among investors was on the decline at the start of the new trading week. A pair of disappointing economic reports from the Unites States further clouded the outlook for U.S. interest rates. Many investors have been expecting another Fed rate hike before the end of the year, but the weak data has raised questions whether that will still be possible.

The continued strength of the U.S. dollar also weighed on commodity prices, driving crude oil back below $50 a barrel. Energy stocks struggled Monday, while gold stocks climbed due to their safe haven appeal.

The decline in the sterling acted as a shock absorber for the economy, Bank of England Deputy Governor Ben Broadbent told BBC Radio 5 live.

"Having a flexible currency is an extremely important thing especially in an environment when your economy faces a shock that is different to your trading partners," he said.

"Allowing the currency to react to that is a very important shock absorber," Broadbent added.

Broadbent said inflation would probably rise above the 2 percent target in the next few years.

Britain is set to witness a slowdown in economic growth next year and a slow recovery afterwards, the EY ITEM Club said Monday.

According to the think tank's latest Autumn Forecast, the U.K. economy will grow 1.9 percent this year, but the pace of expansion is set to slow to 0.8 percent next year before creeping back to 1.4 percent in 2018 and 1.6 percent in 2019.

Sterling's shaky performance so far this month provides a timely reminder that troubles lie ahead, ITEM Club said.

The pan-European Stoxx Europe 600 index weakened by 0.74 percent. The Euro Stoxx 50 index of eurozone blue chip stocks decreased 0.54 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.80 percent.

The DAX of Germany dropped 0.73 percent and the CAC 40 of France fell 0.46 percent. The FTSE 100 of the U.K. declined 0.94 percent and the SMI of Switzerland finished lower by 1.10 percent.

In Frankfurt, Deutsche Bank dipped 0.12 percent on reports that the lender is considering options such as scaling back U.S. operations as part of a wider overhaul to lower costs.

In Paris, Total decreased 1.20 percent and Technip fell 1.03 percent.

In London, Pearson tumbled 8.41 percent after the publishing and education company reported a 7 percent decline in underlying organic sales during the first nine months of the year.

Royal Dutch Shell weakened by 1.66 percent and BP surrendered 1.17 percent. Tullow Oil also finished lower by 1.17 percent.

Gemalto declined 1.48 percent in Amsterdam. The digital security provider announced that it is collaborating with Alibaba Group to provide connectivity and security for YunOS - developed by Alibaba.

Clothing retailer Hennes & Mauritz lost 2.01 percent in Stockholm after its September group sales increased by just 1 percent, hit by unreasonably warm weather.

Banca Popolare di Milano dropped 3.02 percent and Banco Popolare gained 0.78 percent in Milan after the banks received shareholder approal for their merger.

Seafood company Marine Harvest is sank 4.06 percent in Oslo after cutting its 2016 output guidance.

Eurozone inflation accelerated as estimated in September to the highest level since late 2014, final data from Eurostat showed Monday. Inflation rose to 0.4 percent from 0.2 percent in August. A similar high rate was last seen October 2014.

The average asking price for a house in the United Kingdom was up 0.9 percent on month in October, property tracking website Rightmove said on Monday - coming in at 309,122 pounds. That follows the 0.7 percent increase in September.

Business activity in the New York manufacturing sector has unexpectedly seen a continued decline in the month of October, according to a report released by the Federal Reserve Bank of New York on Monday. The New York Fed said its general business conditions index slid to a negative 6.8 in October from a negative 2.0 in September, with a negative reading indicating a contraction in activity.

The drop by the general business conditions index came as a surprise to economists, who had expected the index to rise to a positive 1.0.

Industrial production in the U.S. inched up by slightly less than expected in the month of September, the Federal Reserve revealed in a report released on Monday. The Fed said industrial production edged up by 0.1 percent in September after falling by a revised 0.5 percent in August.

Economists had expected production to rise by 0.2 percent compared to the 0.4 percent drop originally reported for the previous month.