EUROPE MARKETS: European Stocks Finish Down, But Notch Largest Monthly Gain Since October

By FeaturesDow Jones Newswires

Capita leads the way lower as its shares plunge 48%

European stocks closed lower on Wednesday, but the region's benchmark still scored its best month since October.

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U.K. stocks, however, underperformed the wider market after a plunge of nearly 50% for shares of outsourcer Capita PLC rattled investors.

What are markets doing?

The Stoxx Europe 600 index fell 0.2% to finish at 395.46, building on its 0.9% slide from Tuesday. For the month, the pan-European benchmark achieved a 1.6% gain, its biggest monthly advance since October's rise of 1.8%.

Germany's DAX 30 index shed less than 0.1% to end at 13,189.48, while the U.K.'s FTSE 100 index (http://www.marketwatch.com/story/uk-stocks-head-for-january-loss-as-capita-plunge-rattles-nerves-2018-01-31) shed 0.7% to close at 7,533.55. France's CAC 40 bucked the negative trend, inching 0.2% higher to end at 5,481.93.

The euro rose to $1.2425 from $1.2404 late Tuesday in New York, while the pound edged up to $1.4192 from $1.4149 late Tuesday in New York.

What is driving the markets?

Traders were hesitant to make any big bets on Wednesday, still reeling from this week's global selloff for equities that was sparked in part by a rise in bond yields.

Markets largely shrugged off what analysts called an uneventful State of the Union speech by U.S. President Donald Trump late Tuesday, in which he praised the strength of the economy and called for deals on infrastructure and immigration.

Investors were also unfazed by data out on Wednesday showing a drop in eurozone inflation to 1.3% in January from 1.4% in December. The fall was widely expected.

After the European markets close on Wednesday, the U.S. Federal Reserve will announce its latest rate decision, although no changes to policy are expected this time. The meeting marks the last one for Fed Chairwoman Janet Yellen, who is handing over the baton to Jerome Powell.

What's new in economics?

Aside from the inflation data, Eurostat also released numbers on eurozone unemployment, showing the joblessness rate remained at 8.7% in December, in line with forecasts.

Separately, data from Germany showed the country's job boom continued in January as jobless claims fell by a more-than-expected 25,000 (http://www.marketwatch.com/story/german-jobless-claims-fall-more-than-seen-again-2018-01-31).

What are strategist saying?

"European markets have found themselves caught up in the nervous sentiment of the last couple of days, with senior ECB officials suggesting that there is now little further justification for the current bond-buying program much beyond September this year," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

Which stocks are in focus?

Shares of Capita PLC (CPI.LN) tanked 48% after the outsourcing company said it'll suspend its final dividend (http://www.marketwatch.com/story/capita-suspends-final-dividend-plans-share-issue-2018-01-31-3485857) and plans to issue shares as part of a restructuring plan. The announcement comes after rival contractor Carillion PLC (CLLN.LN) earlier in January collapsed after failing to reach an agreement (http://www.marketwatch.com/story/carillion-collapses-after-rescue-talks-with-creditors-uk-government-fail-2018-01-15) with lenders to restructure its debt.

Shares of Electrolux AB (ELUXY) jumped 6.8% after the Swedish home appliance company reported fourth-quarter earnings that beat forecasts.

Volvo AB (VOLV-B.SK) gained 0.5% after reporting record-setting sales in 2017 (http://www.marketwatch.com/story/volvo-revenue-up-11-sales-hit-new-high-in-2017-2018-01-31) after an 11% rise in fourth-quarter revenue.

Ericsson AB (ERIC) slid 9.2% after the Swedish telecom equipment maker announced a bigger-than-expected loss in the fourth quarter (http://www.marketwatch.com/story/ericsson-loss-widens-but-maintains-dividend-2018-01-31).

Also in Sweden, shares of H&M Hennes & Mauritz AB (HM-B.SK) slumped 11%. The fast-fashion retailer reported a 32% drop in fourth-quarter profit (http://www.marketwatch.com/story/hm-profit-down-32-on-price-cuts-lower-footfall-2018-01-31).

Julius Baer Gruppe AG (BAER.EB) edged up 0.2% after the Swiss bank reported 2017 earnings ahead of forecasts and lifted its dividend (http://www.marketwatch.com/story/julius-baer-to-lift-dividend-after-profit-rise-2018-01-31).

(END) Dow Jones Newswires

January 31, 2018 12:44 ET (17:44 GMT)

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