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 as
oil stocks continue to grapple with a stunning slide in oil
prices.
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 they may ramp up stimulus efforts to battle low inflation
and stagnating economic growth.
Markets: The Stoxx Europe 600 index fell 0.5% to 345.64, with
oil companies populating the index's list of the biggest
share-price decliners, still feeling the weight of a decision
Thursday by the Organization of the Petroleum Exporting Countries
not to cut production, at 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 the most heavily exposed to
the decline in oil prices. It cut Afren to an underweight rating
from overweight, prompting Afren shares to drop 11.8%, leading
decliners on the Stoxx Europe 600. Tullow Oil PLC fell 6% 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.
Oil stocks joined miners in slumping after two measures of
manufacturing activity in China -- a key buyer of commodities --
indicated 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. Meanwhile, China's official PMI fell to
50.3, the lowest level since March.
Among miners, iron-ore heavyweight BHP Billiton PLC (BHP) shares
fell 2.2%, Anglo American PLC dropped 1.3% and Rio Tinto PLC gave
up 1.2%.
But winners in session included shares of E. ON SE , climbing
4.2% as the German utility announced plans to split into two
companies.
Stock in Altice SA topped the Stoxx 600 with its gain of 8%
after the company agreed to purchase Portuguese telecom assets from
Brazil's Oi for about 7.4 billion euros ($9.24 billion).
Germany's DAX 30 fell 0.2% to 9,963.51, and France's CAC 40
index lost 0.3% to end at 4,377.33. The U.K.'s FTSE 100 index
declined 1% to 6,656.37. Italy's FTSE MIB index shed 1.6% to
19,686.45 following confirmation that Italian gross domestic
product slipped back into recession in the third quarter.
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