London - European stocks declined, snapping a two-day gain, after the Bank of Japan (BoJ) unexpectedly refrained from increasing stimulus measures.
Banking results were also at the fore. Banco Bilbao Vizcaya Argentaria SA slid 8% after its quarterly earnings tumbled 54%, missing estimates. Lloyds Banking Group lost 1.9% after its revenue and net income fell. Deutsche Bank AG rose 3.6% after it posted a surprise profit.
The Stoxx Europe 600 Index slipped 1.1% at 13:25. A rebound since a February low has lost steam in the past week as the earnings season picked up pace. After reaching a four-month high on April 20, the benchmark fell for three sessions, before a two-day advance through yesterday.
“Todays market reaction is all about the BoJ,” said Ralf Zimmermann, a strategist at Bankhaus Lampe in Dusseldorf, Germany. “‘Investor expectations that had been built ahead of the meeting have now been scaled back. Earnings in a nutshell look OK, but as earnings estimates further down the road are still too high, there will be a negative trend in earnings revisions.”
The Bank of Japan’s lack of response to a strengthening yen disappointed investors seeking impetus from central-bank policy to send shares higher.
In the US, the Federal Reserve held off raising rates yesterday, while omitting a previous reference to risks stemming from global economic developments. Worries over China’s slowdown and a rout in crude spurred stock plunges at the start of the year, and the Stoxx 600 is still 17% below a May record.
In Europe, the earnings season is well under way, with analysts slashing estimates for this year. They project profit at Stoxx 600 companies will slide 2.2% in 2016, before growing at a double-digit pace in the next three years.
Among other shares active on corporate news, Airbus Group dropped 6.3% after reporting a drop in earnings and saying fresh problems with a transport plane could hurt future profit. Sanofi retreated 1.7% after making an unsolicited offer to buy Medivation for about $9.3bn in cash.
Electrolux AB and Clariant AG jumped at least 7.3% after reporting earnings that beat analysts’ estimates.