The 70% plunge in crude oil since June 2014 isn’t weighing simply on equities in U.S., Russia and Latin America, all major producers of the so-called “black gold.”
Major European bourses are feeling the selling heat. It’s unclear how long these indexes in the Old World will remain in bear-market territory.
The iShares Europe (IEV) ETF, which tracks the S&P Europe 350, is down 3% so far this week and more than 27% below its all-time peak of 50.71. The ETF’s annual dividend yield of 3% provides cold comfort. London’s FTSE 100 hasn’t fallen as hard. But Tuesday’s 2.3% slide to 5922 dragged the index 17% below its 52-week peak of 7123 set in April last year. Buyers on the dip are nursing falling-knife wounds.
Germany’s wave of solar power and windmill investments have helped change the continent’s landscape. Yet oil and gas exploration is still big business in Europe. Royal Dutch Shell (RDSA) has a market cap of $133 billion; the U.K.’s BP (BP) is valued at $89 billion. Both stocks fell hard Tuesday in the wake of slumping quarterly sales and earnings reported by both BP and U.S. rival ExxonMobil (XOM) (see front-page story in Wednesday’s IBD.)
French equities are locked within a trading range ever since the CAC-40 made multiyear highs in June 2014. The iShares MSCI France (EWQ) index ETF gapped lower and ended nearly down 3% Tuesday. On Jan. 20, EWQ fell as much as 30% below its 2014 peak of 30.73.
European financial giants are practically on their knees as lending remains sluggish and asset gathering sours. UBS Group (UBS) helped trigger heavy selling across money-center banks. The Swiss banking giant slid 8% Tuesday on a 9% jump in Q4 EPS to 25 cents, missing Wall Street views.
Adjusted pretax profit at UBS’ asset management unit grew 12%. But it saw net new money outflows of 3.4 billion Swiss francs ($3.3 billion) in its key global wealth management unit. UBS shares are near their October 2014 lows and lie nearly 35% below their 23.19 high....MORE
Tuesday, February 2, 2016
"Why European Stock Markets Got Blitzed: Blame Oil Majors, Big Banks"
We'll be back with more on the banks, in the meantime, from Investor's Business Daily: