European Stocks Halt Rebound With Italian Lenders Declining

(Bloomberg) -- The rally that lifted Europe's stocks by the most since February lost steam as declines in Italian banks countered a jump in commodity producers.

The Stoxx Europe 600 Index lost 0.4 percent at 11:56 a.m. in London, with the volume of shares changing hands about 20 percent lower than the 30-day average as the U.S. market was closed for the Independence Day holiday. Banca Monte dei Paschi di Siena SpA sank 9 percent, leading the industry lower, while miners of precious metals Fresnillo Plc and Randgold Resources Ltd. climbed at least 4.3 percent with gold set for its highest closing price since March 2014.

Equities are halting a rebound after jumping 7.6 percent in four days, recovering more than half their losses in the aftermath of the British vote to leave the European Union. With U.K. construction shrinking at its fastest pace since 2009 in June amid the Brexit referendum, both the European Central Bank and Bank of England have pledged to help make liquidity available, and traders pushed back bets for further Federal Reserve rate increases. Chancellor of the Exchequer George Osborne set a goal of lowering the corporate tax rate to 15 percent in an effort to keep businesses investing in the U.K.

“European stocks are taking a breather after the big rally last week and the holiday in the U.S. today,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK in Eppstein, Germany. His firm manages about 250 million euros ($278 million). “We're continuing to see a shift from financials and periphery stocks to safe haven assets such as gold miners. Italian banks will remain losers even with government support because the main opinion is that they'll remain under-capitalized.”

Italy's FTSE MIB Index was among the biggest losers in western-European markets, sliding 1 percent, after the ECB requested Monte Paschi to draw up a plan for tackling its bad-loan burden, asking the lender to reduce its load of soured debt. Automakers and real estate companies were the biggest decliners among industry groups. S&P 500 Index futures expiring in September added 0.2 percent.

The Stoxx 600's 100-day moving average is about to cross above its 50-day mean. The U.K.'s FTSE 100 Index is close to entering a bull market after surging 10 percent in four days, the most since November 2008, amid a weakening of the pound. It slid 0.1 percent on Monday.

Among companies moving on corporate news, RWE AG climbed 2.9 percent as Raymond James said the spinoff of its new renewable energy, grid and retail business could drive a rerating. Rightmove Plc fell 6.8 percent after Barclays Plc cut the shares to the equivalent of a sell, saying they're expensive after the Brexit vote. Moneysupermarket.com Group Plc tumbled 11 percent, the most in the Stoxx 600, after the brokerage lowered its recommendation to neutral rating.

To contact the reporter on this story: Camila Russo in Madrid at crusso15@bloomberg.net. To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net.