European shares stay at six-month lows on Italy, lingering growth concerns

MILAN (Reuters) – European shares stayed at 6-month lows on Tuesday as concerns over a likely clash in Europe over Italy’s budget plans and a worsening outlook for global growth kept sentiment fragile.

The pan-European STOXX 600 index fell 0.1 percent to its lowest level since April before turning flat by 0855 GMT, while Germany’s DAX and the UK’s FTSE 100 were also little changed.

European shares began the day in the black, mirroring a bounce in Chinese stocks, but the gains evaporated as Italian banks .FTIT8300 turned lower after an address to parliament of Economy Minister Giovanni Tria failed to reassure investors.

Earlier on Tuesday, the IMF cut its global economic growth forecasts for 2018 and 2019, saying that trade policy tensions and the imposition of import tariffs were taking a toll on commerce.

“And while the IMF specifically highlighted the US, France, Germany and China as the countries that will, understandably, be worst hit, Britain didn’t escape the doom and gloom, with Brexit uncertainty pointed to as the major issue for the UK economy this year,” said Connor Campbell, analyst at Spreadex.

The oil and gas index .SXEP was the biggest sectoral gainer, up 1.4 percent after crude prices rose as more evidence emerged that crude exports from Iran were falling.

Oil services firm SBM Offshore rose 5.2 percent after Kepler Cheuvreux upgraded the stock to buy, while Italian peers Saipem and Eni rose 2.2 and 1.9 percent respectively after the same broker raised their price targets.

The recent rise in oil price has also fueled worries over slowing growth. Bank of America Merrill Lynch said that in a scenario where Brent prices top the $100 mark, economic growth in the euro area would be depressed by up to 0.5 percentage points.

Although Italian banks declined, rising global bond yields and a JPMorgan upgrade of German lender Commerzbank (CBKG.DE) to overweight helped the broader European banking index edge up.

Commerzbank shares were up 1.9 percent.

Elsewhere, RPC (RPC.L) rose 2.3 percent after the plastic packaging maker gave two private equity firms that are considering rival takeover offers more time to make bids.

Sage Group (SGE.L) led fallers on the STOXX 600, down 4.4 percent, after a downgrade from Barclays.

Earning updates were also in focus on Tuesday.

Wirecard (WDIG.DE) up 4.9 percent after the German fintech company said core profits would grow sixfold by the middle of the next decade on the back of a global boom in e-commerce and digital payments.

Analysts expect earnings of euro zone companies to have grown by 11.8 percent in the third quarter, nearly half the 21.5 percent expected for U.S. companies listed on the S&P 500, according to Refinitiv IBES data.