European Stocks Slide Most in Three Weeks as ECB Decision Looms

(Bloomberg) -- European equities fell amid a blurred outlook for global growth and as investors awaited Thursday's update from euro-area policy makers.

The Stoxx Europe 600 Index closed down 1.1%, its biggest drop in about three weeks. Automakers, industrial companies and banks were among the biggest decliners, while travel shares like EasyJet Plc and Deutsche Lufthansa AG gained as the Telegraph newspaper said the U.K. may adjust its warning list system for foreign trips.

Renewables Sink While Travel Stocks Edge Up: EMEA Equity Movers

Europe's main stock benchmark has struggled for traction since hitting an all-time high during earnings season in August. While investors expect coronavirus vaccination programs to continue to drive the economic reopening, disappointing data has distorted the recovery path just as central bankers consider scaling back support. 

“As the market comes out of its parabolic growth and earnings upgrades phase into a period of tapering, a natural reaction for many is to sell stocks,” Cowen & Co.'s head of trading for Europe, the Middle East and Africa, Carl Dooley, said in written comments.

There's an “undercurrent of nervousness” among investors ahead of Thursday's European Central Bank decision, Chris Beauchamp, IG Group's chief market analyst, said in a note to clients.

Markets may be suffering a delayed reaction to last week's disappointing U.S. jobs report, according to Julien Lafargue, chief market strategist at Barclays Private Bank. “There is also a bit of buyers' fatigue with equity markets having been on a relentless bull,” he said by email. “Staying invested makes sense for the medium term.”

A large volume of share sales after Tuesday's close may have added to selling pressure, added Dooley. The flurry of deals included stake sales in investment firm EQT AB, automaker Stellantis NV and clothing retailer Asos Plc.

The broader outlook for European equities is supported by the recent rebound in corporate profits, according to BlackRock Investment Institute. “Valuations remain attractive relative to history and look even more attractive than at the start of the year thanks to strong earnings,” strategists including Wei Li wrote in a report. 

Brokers' views on global equities have turned slightly more negative, with firms including Morgan Stanley and Credit Suisse Group AG cautioning on the U.S. market. Both are more positive on Europe, however. 

Among individual shares, Sanofi slipped 2.5% after agreeing to buy immune-system therapies firm Kadmon Holdings Inc. for $1.9 billion.

B&M European Value Retail SA gained 6.9%, the Stoxx 600's biggest climber, as analysts noted the discount retailer's better-than-expected margin forecasts.

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