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European shares dragged lower by retailers, resource stocks

Published 16/06/2017, 02:36 am
© Reuters.  European shares dragged lower by retailers, resource stocks
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* STOXX 600 down 0.4 pct

* Basic resources weigh on Europe

* Weakness adds to signs of cyclical catalysts fading

* British mid-caps fall sharply on depressed retail sales

* Retailers under pressure on doubts over consumption (Adds closing prices)

By Helen Reid

LONDON, June 15 (Reuters) - European shares fell on Thursday as sagging oil prices hit basic resources stocks, while retailers slipped after H&M HMb.ST missed expectations and UK data showed consumers are feeling the impact of rising inflation.

Crude prices wallowed near a six-week low as doubts grew over OPEC's ability to cut oil supplies, weighing on stocks worldwide and adding to worries over the resilience of sectors most geared to economic growth.

The pan-European STOXX 600 .STOXX benchmark fell to its lowest since April 24 before paring some losses and ended down 0.4 percent. Euro zone stocks .STOXXE and blue-chips .STOXX50E fell 0.6 percent.

Basic resource stocks .SXPP fell 1.7 percent while energy stocks .SXEP fell 0.6 percent.

"Numbers showing the supply-demand imbalance are pushing commodities to the downside," said David Stubbs, global market strategist at JP Morgan Asset Management.

"OPEC has been unable to control global production, and the situation in Qatar is showing it is not very united," he added.

Large brokers have been turning away from cyclicals and into defensives lately as they see strong momentum in European data fading, removing a catalyst for the sectors most sensitive to growth.

Energy stocks are the worst-performing in Europe this year, and the only sector to have fallen year-to-date.

Retailers were also under significant pressure.

Europe's retail index .SXRP fell 2.2 percent, the biggest sectoral faller in Europe, and Britain's mid-caps .FTMC suffered their sharpest fall this year, as investors grew more skittish about the resilience of consumer spending in Britain, where is inflation is climbing due largely to a weak pound.

Retail sales fell more sharply than expected in May, adding to multiplying signs of inflation depressing consumer spending, the engine of the UK economy. don't think this is a surprise to anyone in terms of the narrative about how weak and stretched the consumer is and will be for the next quarters," said Stubbs.

"If retail sales are weak then the pie is contracting and someone is going to get hammered. Those that are unable to deal with that are going to see a much weaker bottom line," he added.

DFS Furniture DFSD.L plummeted 20 percent on Britain's small-cap index after a profit warning which it blamed on a dip in demand, with significant declines in store footfall. Europe, H&M HMb.ST shares fell 5.5 percent after May sales missed forecasts, adding to a string of softer figures from the Swedish fashion retailer, which blamed tough trading conditions. PFC.L shares were a rare bright spot on falling markets, up 3.9 percent, after a Jefferies upgrade to buy.

Telecoms firm Proximus PROX.BR fell 3.6 percent after suffering a cut to 'sell' from Citi.

Meanwhile stocks in Athens .ATG inched 0.15 percent lower as its international lenders prepared on Thursday to unblock as much as 8.5 billion euros in loans that Athens desperately needs next month to pay its bills .

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