By Carla Mozee, MarketWatch European oil E&P has fallen
roughly 35% this year
LONDON (MarketWatch) -- European stocks fell Monday, with shares
of miners struggling after soft economic data from China, and oil
stocks still reeling as the sector grapples with the stunning slide
in oil prices to fresh multiyear lows.
Investors also weighed a new round of European economic data,
highlighted by further slowing in manufacturing activity in the
eurozone. Data firm Markit said its monthly survey of purchasing
managers fell to 50.1 in November, down from a preliminary estimate
of 50.4. The data come as European Central Bank officials have
indicated it may set up stimulus efforts to battle low inflation
and stagnating economic growth.
Markets: The Stoxx Europe 600 index fell 0.5% to 345.46, with
oil companies populating the index's list of biggest share-price
decliners, still feeling the weight of a decision Thursday by the
Organization of the Petroleum Exporting Countries not to cut
production as a time when the sector is dealing with oversupply.
U.S. crude-oil futures (CLF5) were slightly higher Monday, although
the $67-a-barrel level still represents a more than four-year low
for crude prices.
J.P. Morgan Cazenove said oil and gas producer Afren PLC is
among the companies whose shares are most heavily exposed to the
decline in oil prices. It cut Afren to an underweight rating from
overweight, prompting Afren shares to drop 9.2%, leading decliners
on the Stoxx Europe 600. Tullow Oil PLC fell 4.8% as its rating was
cut to neutral from overweight.
The European oil exploration and production space has fallen
roughly 35% this year, tracking the recent sharp slide in the oil
price, and "while this has been an uncomfortable ride, downside
risks remain, in our view," said analysts at J.P. Cazenove, in an
note Monday.
The sector is likely to face oil prices hovering below $90 a
barrel for at least the next six to 12 months, or longer, and the
weaker prices come at a time that "balance sheets are more
stretched than at any point in recent memory given investments in
projects sanctioned with $100 a barrel in mind", the analysts
added.
Mining stocks slumped after two measures of manufacturing
activity in China -- a key buyer of commodities -- indicating
further weakness in the world's second-largest economy. HSBC early
Monday said its China purchasing managers index fell to a six-month
low of 50.0, from 50.4 in October. Meanwhile, China's official PMI
fell to 50.3 from 50.8 in October, the lowest level since
March.
In that group, iron-ore heavyweight BHP Billiton PLC (BHP)
shares fell 2.8%, Antofagasta PLC lost 1.1%, Anglo American PLC
dropped 1.9% and Rio Tinto PLC gave up 1.3%.
But winners in session included shares of E. ON SE , climbing
4.5% as the German utility plans to split into two companies.
Stock in Altice SA topped the Stoxx 600 with its gain of 7.4%
after the company agreed to purchase Portuguese telecom assets from
Brazil's Oi for about 7.4 billion euros.
Germany's DAX 30 fell 0.4% to 9,940.54 and France's CAC 40 index
lost 0.4% at 4,372.82. The U.K.'s FTSE 100 index declined 1.1% to
6,645.96. Italy's FTSE MIB index shed 1.7% following confirmation
that Italian gross domestic product slipped back into recession in
the third quarter.
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