European
equities tumbled the most since the August selloff as the additional
stimulus measures unveiled by the region’s central bank underwhelmed
investors.
The
Stoxx Europe 600 Index lost 3.1 percent at the close of trading in
London, reversing a gain of 0.9 percent. The European Central Bank
lowered its deposit rate, and President Mario Draghi said it will extend
its quantitative-easing program until at least March 2017, including
debt issued by regional and local governments. It didn’t, however,
expand its monthly asset purchases.
Heading
into today’s meeting, investors had high expectations. The Stoxx 600
climbed 13 percent from its low in September through yesterday,
including its best two-day rally since July after Draghi signaled in
October that the central bank would consider additional measures. On
Monday, the gauge closed at a three-month high, taking its valuation to
16.5 times estimated earnings -- closer to the multiple of 17.6 for the
Standard & Poor’s 500 Index.
Traders
were so confident that they saw little need to hedge: The number of
Euro Stoxx 50 Index options changing hands last month was the lowest
since July 2014. Contracts betting on further gains were the most owned.
After
leading gains earlier on Thursday, carmakers were some of the biggest
losers as the euro erased losses. Out of 600 companies in Europe’s stock
gauge, 560 fell, with commodity producers slumping the most. Trading of
Stoxx 600 companies was 36 percent greater than the 30-day average.
The
central bank revised its inflation outlook, cutting it to 1 percent for
2016 and 1.6 percent for 2017, from 1.1 percent and 1.7 percent,
respectively. It kept its prediction for next year’s economic growth at
1.7 percent and increased it to 1.9 percent for 2017, from 1.8 percent.
UBS Group AG said it kept its overweight rating on European stocks after today’s central-bank decision.
Source: Bloomberg
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