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European Stocks Slip, Led Lower by Chemical and Bank Shares

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07/09/2019 | 07:13am EDT

By Avantika Chilkoti

-- U.S. stock futures slide and Treasury yields pick up

-- European stocks are dragged lower by a string of bad corporate news

-- Most markets in Asia also decline

European stocks declined on Tuesday, following a spate of unwelcome corporate news on some of the region's biggest banks, chemical companies and auto makers.

The pan-continental Stoxx Europe 600 benchmark shed about 0.6%, putting it on course to fall for a third straight day, with marquee German stocks suffering some of the sharpest losses. U.S. stock futures also dipped, while over in Asia, most markets declined slightly, led by a 0.8% drop in Hong Kong's Hang Seng Index.

In Europe, the biggest decliners included BASF, which dropped about 5% after the German chemicals giant slashed its profit forecast on Monday evening, citing the continuing trade dispute between the U.S. and China as well as sluggish demand in the auto market. The warning prompted a drop in the stock of rivals such as Covestro AG, which fell 4%, and Lanxess, which declined 3.8%.

Deutsche Bank dropped 3.7%, extending its rout for a second day, amid growing skepticism over Chief Executive Christian Sewing's plan to cut jobs and restructure the investment bank. Smaller Danish rival Danske Bank slumped about 3.4% after it published a profit warning Monday.

Within the automotive sector, Volkswagen AG dropped about 1% after the Securities and Exchange Commission said the auto maker dragged out a federal investigation into whether it defrauded U.S. bond investors who weren't told about its efforts to cheat on diesel-emissions tests.

There is widespread pessimism among investors about Europe, as there is little room for the European Central Bank to cut rates further, local banks are fragile and productivity gains have been sluggish, according to Peter Westaway, chief European economist at Vanguard. But Mr. Westaway says he encourages clients not to avoid stocks in the region altogether.

"European equities are actually quite attractively priced because there is so much bad news priced in and they probably unperformed for the past few years compared to other markets," he said. "The uncertainty has been removed but that still doesn't mean there aren't people out there who are just skeptical about how effective Q.E. can be," he said.

Meanwhile, stock futures linked to the S&P 500 index declined 0.4%. The three main U.S. equity benchmarks, while still hovering near record highs, have dropped for two consecutive days after better-than-expected jobs data on Friday led investors to speculate that the Federal Reserve may take it slow in easing key interest rates.

In a rare bright spot, shares in Ocado gained 9.8% in U.K. trading after investors grew more optimistic about growth prospects for the British online groceries group following its earnings report.

Investors globally are poised for fresh commentary from U.S. Federal Reserve Chairman Jerome Powell and his deputy, Randal Quarles, later in the day that may provide important signals on the chances of rate cuts this year.

Pete Gunning, global chief investment officer at Russell Investments, is among those investing carefully -- "thoughtfully doing nothing," he said -- in anticipation of a global slowdown. "While we are not expecting Armageddon, we are definitely late cycle," he said.

The yield on 10-year Treasurys ticked up to 2.054% from 2.030% on Monday. Yields and prices move in opposite directions.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BASF SE 1.16% 56.85 Delayed Quote.-5.88%
COVESTRO AG 0.92% 38.3 Delayed Quote.-11.30%
DANSKE BANK A/S 3.40% 91.12 Delayed Quote.-29.31%
DEUTSCHE BANK AG 4.71% 6.16 Delayed Quote.-11.58%
DJ INDUSTRIAL 1.20% 25886.01 Delayed Quote.10.97%
HANG SENG 0.87% 25749.62 Real-time Quote.-0.37%
LANXESS 1.65% 50.48 Delayed Quote.25.57%
NASDAQ 100 1.59% 7604.108768 Delayed Quote.18.33%
NASDAQ COMP. 1.67% 7895.993811 Delayed Quote.17.16%
OCADO GROUP PLC 1.28% 1151 Delayed Quote.45.70%
PORSCHE HOLDING 0.95% 55.1 Delayed Quote.6.70%
S&P 500 1.44% 2888.68 Delayed Quote.13.59%
STOXX EUROPE 600 1.24% 369.63 Delayed Quote.8.44%
STOXX EUROPE 600 NR 1.25% 794.04 Delayed Quote.11.07%
VOLKSWAGEN AG 1.23% 139.86 Delayed Quote.0.68%
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