Sagging oil drags European stocks lower
European shares fell yesterday as sagging oil prices hit basic resources stocks, while retailers slipped after H&M 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 benchmark fell to its lowest since April 24 before paring some losses and ended down 0.4pc. Eurozone stocks and blue-chips fell 0.6pc.
Basic resource stocks fell 1.7pc while energy stocks fell 0.6pc.
"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 fell 2.2pc, the biggest sectoral faller in Europe, and Britain's mid-caps suffered their sharpest fall this year.
DFS Furniture plummeted 20pc on Britain's small-cap index after a profit warning which it blamed on a dip in demand, with significant declines in store footfall.