UKX FTSE 100 Index

By Mike Bird 

European stocks were lower Wednesday, following Asian equity markets downward after a string of disappointing earnings reports from large U.S. companies, and a drop in oil prices.

The Stoxx Europe 600 index pulled back 0.8% in European morning trading, led by a 0.9% drop in the U.K.'s FTSE 100 index and a 1% decline in Germany's DAX.

In the U.S., S&P 500 futures were down 0.43% before the New York open. Futures don't always reflect prices after the opening bell.

West Texas Intermediate crude fell back below $50 a barrel, down by 1.3% at $49.32. Brent crude prices fell by 1% to $50.29. Energy companies led the fall in European stocks, with the oil and gas sector of the Stoxx 600 down 1.4% following the drop in crude prices.

Oil prices remain higher than they were at the end of September, when oil-producing cartel the Organization of the Petroleum Exporting Countries announced in Algiers a prospective deal to cut output.

"The oil market generally has been characterized by the supply side in recent years, and the Algiers meeting provided a bit of rhetoric from OPEC saying they'd be more aware of prices," said Nandini Ramakrishnan, global market strategist at J.P. Morgan Asset Management. "Our longer-term view is that we should see a higher oil price next year."

Consumer confidence data from Germany issued early Wednesday showed slightly weaker sentiment than expected at 9.7, its lowest reading since June and below the 10 that analysts had forecast.

"Despite a somewhat more downbeat outlook for personal finances, consumers assessed that economic prospects had improved, with the relevant indicator rising to the highest level in more than a year," said Mantas Vanagas, economist at Daiwa Capital Markets Europe.

Meanwhile, French consumer sentiment in October, recorded by statistical agency INSEE, showed the joint-strongest confidence level since 2007. The index rose to 98, but was still below 100, the long-term average level since 1987.

Asian stocks closed broadly lower, with Hong Kong's Hang Seng down 1%, and China's Shenzhen A-share index down 0.4%. Japanese equities bucked the trend with the Nikkei 225 index closing up slightly.

After falling by as much as 1.3% against the dollar intraday Tuesday, sterling was mixed Wednesday morning, up 0.27% against the dollar at $1.221, but down 0.1% against the euro at EUR1.117.

"With the terms and conditions of the U.K.'s future trade links still unclear it is too early to rule out further downside risks in sterling," said Geoffrey Yu, head of UBS Wealth Management's U.K. investment office. Mr. Yu believes sterling could fall to as low as $1.10 temporarily over the next year.

Bond yields in developed markets also picked up during the European morning. U.K. 10-year gilt yields rose to 1.14%, from 1.11% on Tuesday. German 10-year yields rose to 0.57%, from around 0.22% on Tuesday.

Write to Mike Bird at Mike.Bird@wsj.com

(END) Dow Jones Newswires

October 26, 2016 06:55 ET (10:55 GMT)

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