Stoxx 600 marks worst month in 1 year
Germany's DAX 30 joined other European benchmarks in closing lower Friday, with Bayer AG ending a losing month for regional equities by cautioning investors that its profit was under pressure.
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The DAX slumped 0.7% to end at 12,325.12, marking a fourth straight loss. The fall in German stocks hurt the broader Stoxx Europe 600 , which finished lower by 0.3% at 379.37.
European equities had opened higher, after a 1.3% selloff on Thursday (http://www.marketwatch.com/story/european-stocks-step-lower-as-euro-rally-outweighs-gains-for-banks-miners-2017-06-29) left the index as its lowest since April. But equities couldn't overcome hefty weekly gains in both the euro and the British pound against the U.S. dollar.
Stronger currencies can reduce revenue made overseas by international companies with heavy weighting on indexes across Europe and on the U.K.'s FTSE 100.
"Rising yields in U.K. and European bonds are driving the moves in sterling and the euro -- both of which are up more than 2% on the dollar this week -- with the slew of commentary from prominent central bankers being deemed much more hawkish than anticipated," said Craig Erlam, Oanda's senior market analyst.
"The quite deliberate shift, particularly from the Bank of England, is a significant shift from policy makers with previous comments being broadly neutral or erring on the dovish side," he said.
See:Here's why the stock market is spooked by central bankers (http://www.marketwatch.com/story/heres-why-the-stock-market-is-spooked-by-central-bankers-trump-agenda-delays-2017-06-29)
Read:Dollar bulls have a lot to worry about in second half of 2017 (http://www.marketwatch.com/story/dollar-bulls-have-a-lot-to-worry-about-in-second-half-of-2017-2017-06-29)
For the week, the Stoxx 600 index stumbled 2.1%, contributing to a loss of 2.7% for June. That's the worst monthly performance since June 2016.
The pan-European index pulled back 0.5% for the second quarter, but was still up 5% on a year-to-date basis.
Indexes: The export-heavy DAX 30 closed the week down 3.2%, hurt by euro strength as well as by Bayer AG's (BAYN.XE) slide of 4.2% on Friday. The pharmaceuticals and chemicals heavyweight warned earnings would take a hit (http://www.marketwatch.com/story/bayer-warns-on-earnings-on-high-brazil-inventories-2017-06-30) because of unexpectedly high inventories at its operations in Brazil.
"Bayer is also expecting earnings to be additionally impacted by unfavorable currency developments," it added.
In Paris, the CAC 40 index closed down 0.7% at 5,120.68, pushing its June decline to 3.1%. Year-to-date, the CAC picked up 5.3% and the DAX rose 7.4%.
In London, the FTSE 100 closed Friday's session down 0.5% (http://www.marketwatch.com/story/ftse-100-struggles-as-pound-clings-to-multiweek-high-2017-06-30) at 7,312.72. It slumped by 2.8% in June, the worst monthly performance since September 2015. But it tallied a first-half gain of 2.4%.
Look for government bond yields world-wide to continue to rise over the coming months, extending gains that came into sharp focus this week, Capital Economics said Friday.
"To be clear, we do think that rising bond yields are likely to weigh on stock markets," wrote John Higgins, chief markets economist at Capital Economics. "But we don't think that this will be enough to prompt a big correction in the second half of this year -- we forecast only a small pullback in the S&P 500 and that the FTSE 100 and DAX 30 will rebound," he said.
A "favorable economic backdrop," should support equities in the second half of 2017, he said.
"In our view, such a correction is more likely in 2019, when we expect the US economy to be faltering," he said.
Other developments: German food-delivery company Delivery Hero AG (DHER.FF) rose 5.5% in its trading debut on the Frankfurt Stock Exchange. Shares priced at 25.50 euros, allowing the startup to raise more than EUR1 billion.
The eurozone's annual rate of inflation rose to 1.3% in June (http://www.marketwatch.com/story/eurozone-inflation-falls-for-second-month-in-a-row-2017-06-30), but that's lower than May's reading.
(END) Dow Jones Newswires
June 30, 2017 13:46 ET (17:46 GMT)