UniCredit swings to quarterly profit
European stocks dropped Thursday, pulling back from a 21-month high, with the market coming under pressure as the euro marched higher in the wake of a lackluster economic outlook for the British economy.
The Stoxx Europe 600 index fell 0.6% to 394.03, hitting intraday lows as investors also saw U.S. stocks slide after a round of disappointing earnings reports (http://www.marketwatch.com/story/nasdaqs-record-run-on-the-line-as-snap-tumbles-after-results-2017-05-11), including from department store operator Macy's Inc. (M).
The pan-European index on Wednesday (http://www.marketwatch.com/story/european-stocks-back-away-from-21-month-high-as-2017-05-10) ended at its highest since August 2015, aided by a stretch higher for oil prices. On Thursday, oil prices climbed more than 1%, but that wasn't enough to lift the Stoxx Europe 600 Oil & Gas index into positive territory.
Euro vs. pound: The pound fell against both the euro and the U.S. dollar after the Bank of England trimmed its 2017 economic growth forecast to 1.9% from 2%, and Bank of England Gov. Mark Carney said British consumers are feeling the crunch from the stagnant pace of wage growth along with rising consumer prices.
The central bank left its key rate at 0.25%, with only one of seven board members voting for a rate increase.
"This left sterling in a rather bad mood," said Connor Campbell, financial analyst at Spreadex, in a note. Sterling fell from $1.29 against the dollar, hitting an intraday low of $1.2849, while the euro climbed 0.5% to 84.38 pence.
"Sterling's slide did have ramifications elsewhere," Campbell added, as "the euro's gains drove the DAX and CAC lower." A stronger euro can weigh on shares of European exporters, as their goods become more expensive for overseas customers to purchase when the shared currency strengthens.
Germany's DAX 30 index closed down 0.4% at 12,711.06, easing from a record closing high on Wednesday. France's CAC 40 gave up 0.3% to end at 5,383.42.
While a decline in the pound's value tends to lift shares of multinational companies listed on the FTSE 100, the London benchmark only eked out a closing gain of less than 2 points at 7,386.63.
The British currency hasn't traded above $1.30 since early October.
"If we're going to see sterling move above $1.30 on a sustainable basis, we'll probably need to see much firmer signs of things like wage growth and output in the U.K. economy than what we have seen," said Ranko Berich, head of market analysis at Monex Europe, in an interview.
Read:The ECB has 3 big reasons to wind up QE--here's why it shouldn't (http://www.marketwatch.com/story/the-ecb-should-avoid-the-temptation-to-cancel-qe-2017-05-10)
Movers: Telefonica SA shares (TEF) slumped 4%, the worst performing on Spain's IBEX 35 index. The telecom heavyweight logged a 42% rise in first-quarter net profit (http://www.marketwatch.com/story/telefonica-profit-up-42-on-currency-gains-2017-05-11). However, quarterly results were slightly below consensus, UBS analysts said in a note.
The IBEX 35 gave up 1.6% to close at 10,861.40.
UniCredit shares (UCG.MI) bulked up 3.7% after the Italian lender swung to a first-quarter profit of 907 million euros (http://www.marketwatch.com/story/unicredit-reports-profit-of-907-million-euros-2017-05-11) ($986 million), reflecting efforts to clean up its balance sheet. The bank lost more than EUR13 billion in the fourth quarter.
Meanwhile, Mediobanca SpA (MB.MI) picked up 1.3% after the Italian bank notched a 39% rise in profit for the first nine months of the year.
Those gains contributed to a 0.9% rise in the FTSE Italia All-Share Banks index that pushed the benchmark to its highest level since March 2016, FactSet data showed.
But the broader Stoxx Europe 600 Bank index turned lower, ending down 0.5%. French lender Credit Agricole SA (ACA.FR) said profit more than tripled (http://www.marketwatch.com/story/credit-agricole-profit-more-than-triples-2017-05-11) to EUR845 million in the first quarter. But its shares flipped down to close with a 0.9% loss.
(END) Dow Jones Newswires
May 11, 2017 12:21 ET (16:21 GMT)