Europe close: Stocks get off to weak start in May

A weaker than expected reading on the state of China´s manufacturing sector added to worries about global growth and added to already weak sentiment among analysts heading into what is typically a seasonally weak time of the year for trading in equities, May and summer.

The benchmark DJ Stoxx Europe 600 index kicked May off with a drop of 1.66% or 5.68 points to 335.56, Germany’s DAX was 1.94% or 196.50 points weaker to 9,926.77 and France’s CAC was 1.59% lower.

Oil prices retreated amid concerns about oversupply. West Texas Intermediate was down 2.6% to $43.67 a barrel as of 16:45 BST while Brent crude was 1.9% weaker at $44.97.

Quarterly trading updates out of the likes of Commerzbank, HSBC and UBS also weighed on the shares of lenders.

The pan-European benchmark´s gauge of Basic Resource companies paced losses, retreating by 6.36% or 19.13 points to 281.75 followed by losses of 3.54% in the sub-index linked to Banks´ shares and a drop of 2.55% in a gauge of Automobiles&Parts stocks.

Three-month LME traded copper futures were down by 2.5% at $4,914.00 per metric tonne as of 15:35 BST.

Earlier in the session, the China Caixin manufacturing PMI fell to 49.4 in April from 49.7 in March, missing economists’ expectations for a reading of 49.9. A reading below 50 indicates contraction.

“These numbers support our contention that the current resources rally has been mainly driven by speculation and is overdone, setting the stage for a classic ‘Sell in May’ event - albeit actual timing is likely to be a bit more fluid than that appellation might suggest,” said broker Shore Capital.

For their part, strategist at JP Morgan went 'underweight' on global equities for 2016 in their balanced portfolios - for the first time since 2007.

In corporate news, Commerzbank slid after it said profit in the first quarter halved, with net income down to €163m from €388m the year before.

UBS was under pressure as the Swiss bank’s first-quarter pre-tax profit slumped due to weakness in the wealth management business.

HSBC reversed earlier gains to trade lower after the bank reported a 14% drop in first-quarter profit.

Aberdeen Asset Management slumped after it posted a big decline in first-half profit as the money manager took a hit from emerging-market weakness.

BMW skidded after its first-quarter earnings before interest and tax missed expectations, while Lufthansa flew lower after announcing it will slow the pace of its growth plans this year, as it reported a net loss for the first quarter.

On the upside, BNP Paribas was dragged lower despite posting an increase in first-quarter net profit, while RSA Insurance gained ground after an upgrade by Barclays.

In macroeconomic news, data from Eurostat showed producer prices in the Eurozone rose 0.3% on the month in March versus economists’ expectations for a 0.1% increase and a 0.7% drop in February.

On a year-on-year basis, prices were down 4.1% compared with forecasts for a 4.3%.

Dennis de Jong, managing director at UFX.com, said: “Following yesterday’s uptick in Markit manufacturing data, ECB president Mario Draghi would have been hoping for a better result in today’s producer price index.

“The next seven weeks will be a huge test for the euro, culminating with a vote on the UK’s membership of the European Union, which is poised precariously on a knife edge."