European shares extend losses, dragged down by energy stocks

European shares dropped on Friday, extending losses from the previous session when the ECB's new stimulus measures disappointed some investors, as falling oil stocks adding pressure. Oil stocks turned lower, falling 1.5 percent, as crude prices dropped. Sources said Opec had agreed to roll over its policy of maintaining crude production to retain market share and also agreed to raise its output ceiling.
The pan-European FTSEurofirst 300 index fell more than 1 percent, a day after slumping 3.3 percent after the ECB's policy update fell short of high expectations. That was its biggest one-day fall since late August. The ECB on Thursday cut its deposit rate deeper into negative territory and extended its bond-buying programme by six months. Many considered that the bare minimum after the bank had for weeks stoked expectations of more stimulus.
"In an environment where you were expecting central banks to pump in more liquidity and you don't get it, then investors are just reassessing their expectations of what central banks are going to deliver for them," Commerzbank economist Peter Dixon said. "Equity valuations look pretty stretched given what's happening to the underlying economy. We could expect choppy moves in the remaining weeks of the year." Bearish broker notes hit shares of some companies. Sandvik fell 1.6 percent after J.P. Morgan cut its rating on the engineering company to "underweight" from "neutral" and lowered its target price for the stock.
Whitbread shares dropped 3.7 percent. Barclays cut its stance on the stock to "equal weight" from "overweight" and lowered its price target to 5,200 pence from 5,800 pence. Barclays downgraded the leisure group to reflect a slower growth in UK RevPAR (revenue per available room), deteriorating leading indicators and reduced corporate capex expectations. On the positive side, AXA rose 3.7 percent after setting a range for its solvency ratio under new European capital rules, which the French insurer said would allow it to pay higher dividends and invest in growing its business.