European stocks retreat as banks slip; pound falls

BLOOMBERG

U.S. stocks slipped after the biggest gain in two months, as global equities continued to churn just below multiyear highs amid corporate results and persistent signs that worldwide growth remains lackluster. Metals advanced as the dollar slipped.
The S&P 500 Index retreated for the first time in four days, while European equities slid from a one-week high. Industrial metals from aluminum to zinc climbed as Glencore Plc forecast demand to exceed supply. Crude fluctuated before a U.S. inventory report. The pound fell after industrial production data missed estimates. Brazilian shares advanced as the Senate geared up for a vote that could oust the president.
As a mixed earnings season draws to a close, ABN Amro Group NV’s 13 percent slide in profit on Wednesday reignited concern about the health of the European banking sector, while Macy’s Inc.’s disappointing sales raised the specter of a weakening U.S. consumer. That’s adding to the gloom in global equities after a selloff last week erased some $1.3 trillion of value, spurred by subdued economic data in the U.S. and China.
“Given that equities are about 3 percent away from all-time highs in absence of earnings growth, equities are priced to perfection within a thin margin of error,” Terry Sandven, who helps oversee $126 billion as chief equity strategist at U.S. Bank Wealth Management in Minneapolis, said by phone. “We still need to see earnings accelerate in the second half of this year to propel stocks higher. Upcoming catalysts suggest a cautious bias with an unclear Fed and Brexit meeting.”

Stocks
The S&P 500 fell 0.2 percent at 9:31 a.m. in New York, halting a three-day rally of 1.7 percent.
Staples Inc. slid and Office Depot Inc. plunged as they abandoned a merger. Walt Disney Co. fell after posting profit that missed estimates and saying it will shut down its Infinity video-game division. Macy’s slid as the largest U.S. department-store company cut its profit forecast for this year and posted first-quarter revenue that missed analysts’ estimates
The Stoxx 600 lost 0.6 percent at 1:27 p.m. in London. A gauge of lenders fell the most on the index, with Raiffeisen Bank International AG tumbling 10 percent after saying it’s considering merging with its parent company to ease the pressure of regulatory requirements. ABN Amro lost 3.5 percent. EON SE led utility stocks lower, sliding 5.3 percent on concerns about how much new capital Germany’s largest utility will need to fund the nation’s exit from nuclear power.
Total SA and Eni SpA dragged energy producers down. JC Decaux SA led a retreat in media shares, sinking 8.6 percent after forecasting lower quarterly revenue growth. Carlsberg A/S, the world’s fourth-largest brewer, slid 2.7 percent after announcing first-quarter sales.
Deutsche Post AG advanced 2.2 percent after reporting its fastest profit growth in 13 quarters. BHP Billiton Ltd. rose 2.7 percent, propelling a measure of miners to the biggest gain on the Stoxx 600.
As the U.S. earnings season draws to a close, analysts have moderated their predictions for a decline in first-quarter profits to 7.4 percent, from 9.5 percent at the start of April. So far, about 75 percent of the firms that have released results beat profit estimates, and 54 percent exceeded sales projections.

Currencies
The yen climbed 0.6 percent to 108.62 per dollar, after sliding more than 2 percent over the last two days. The currency has gained more than 10 percent this year, making it harder for the Bank of Japan to achieve its inflation goal.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, fell for a second day.

Commodities
Zinc and lead rose by more than 2 percent in London, while copper gained 1.1 percent. Commodities are “now close to pre-supercycle levels,” when growth in Asia fueled a surge in prices, Glencore said. The London Metal Exchange’s LMEX Index of six industrial metals closed at a one-month low on Tuesday.
West Texas Intermediate crude fell 0.6 percent to $44.34 a barrel. Concern over supply disruptions in Nigeria and Libya, holders of Africa’s largest oil reserves, was countered by speculation that U.S. data on Wednesday will show American stockpiles expanded from the highest level since 1929.
Gold gained 1 percent, buoyed by the dollar’s retreat. Goldman Sachs Group Inc. this week raised its forecasts for bullion prices as it scaled back expectations of U.S. Federal Reserve rate hikes over the next year. Silver climbed as much as 1.3%.
Bonds
U.S. Treasuries due in a decade yielded 1.76 percent, near a one-month low. Odds on the Fed raising key rates at its next meeting in June have dropped to 4 percent, from 17 percent a week ago, before weaker-than-projected U.S. payrolls data undermined perceptions of the economy’s strength.
A report on retail sales is due Friday, along with an update on producer prices. The U.S. will auction $23 billion of 10-year notes on Wednesday.
Pacific Investment Management Co.’s Total Return Fund is reducing its holdings of developing-nation debt on speculation the Fed is still on course to raise interest rates. The fund cut its holdings of emerging-market debt to the lowest level in almost two years in April, based on data from the Pimco website.
Spain is offering investors 50-year bonds on Wednesday, joining other euro-area countries taking advantage of historically low interest rates with ultra-long debt sales. The planned sale via banks will be Spain’s first of a half-century term since September 2014. This will see the Iberian nation follow France and Belgium, which sold 50-year bonds last month.