European Stocks Fall Sharply

By Tommy Stubbington 

        A sharp slump in Chinese markets piled further pressure on global stocks Monday after last week's declines.
        The fresh turmoil in China, which came amid concerns the government is pulling back on measures to prop up to the market, added to existing worries about patchy economic data and corporate earnings around the world.
        In Europe, the Stoxx Europe 600 was 1.3% lower in early trade Monday. Germany's DAX fell 1.1%, France's CAC 40 was 1.2% lower, while the U.K.'s FTSE 100 was down 0.2%.
        U.S. stock futures pointed to a 0.2% opening decline for the S&P 500 after Friday's 1.1% fall.
        Changes in futures don't necessarily predict market moves after the opening bell.
        A sharp rally two weeks ago after Greece reached a deal with its creditors to negotiate a new bailout has foundered amid lackluster earnings in Europe and the U.S., said Francois Savary, who oversees $11.4 billion as chief strategist at Swiss bank Reyl.
        "There are a lot of bets that the economic recovery in Europe is here and that is going to boost earnings. But so far it is OK, but it isn't stellar," he said.
        Declines in Chinese stocks have also brought to the fore concerns about slowing growth in the world's second-largest economy, Mr. Savary added.
        Earnings were again in focus in Europe on Monday. Swiss bank UBS AG declined despite second-quarter profit that exceeded forecasts. Airline Ryanair Holdings PLC also fell after it didn't raise its full-year profit guidance.
        Consumer products giant Reckitt Benckiser Group PLC climbed after reporting a rise in earnings.
        Given relatively high valuations, equity markets "need better earnings" to drive further gains, said Ian Williams, economist and strategist at Peel Hunt.
        In currency markets, the euro rose 1.0% against the dollar to $1.1095. The common currency has recently tended to rise at times of market stress. Rock-bottom interest rates in the eurozone mean investors borrow in euros to fund riskier bets elsewhere, according to BNP Paribas strategist Sam Lynton-Brown. When risks rise they back out of these bets, buying euros to repay their borrowings, he said.
        In bond markets, eurozone debt seen as riskier by investors weakened modestly. Spanish and Italian 10-year bond yields rose slightly to 1.94% and 1.90% respectively. Yields rise as prices fall.
        In commodities, Brent crude oil was marginally lower at $54.59 a barrel. Gold rose 1.5% to $1,102.20 an ounce.
        Write to Tommy Stubbington at tommy.stubbington@wsj.com
        (END) Dow Jones Newswires

        July 27, 2015 04:38 ET (08:38 GMT)

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