Stocks Slide as Oil Drops Following Unexpected Inventory Build

European stock markets are heading south, as falling oil prices coupled with disappointing reports from Rio Tinto Plc weighed on mining and oil shares. FTSE 100 has been hit by a sharp drop in the Construction PMI, while the strong EUR is not helping the DAX, despite gains in technology shares, which were underpinned by results from Apple overnight, which reported much better than expected financial results after the bell on Tuesday.  The API reported an unexpected build in crude oil inventories which took WTI lower. Eurozone PPI pulled back in July, in line with expectations.

WTI crude futures dove to a 48.55 low on API data showing U.S. inventories to have unexpectedly risen by 1.8 million barrels in the latest reporting week. Prices subsequently rebounded back to the mid-49’s. The WTI benchmark had traded at 50.41, a two-month high. Reports that Shell’s Pernis refinery in the Netherlands, which is Europe’s second biggest refinery, will remain closed until at least the second half of August, gave prices a prop.

Eurozone PPI Dipped in July

Eurozone PPI inflation fell back to 2.5% year over year from 3.4% year over year in the previous month. Much of the decline was due to energy prices, which had less of an inflating role in June, as energy price inflation fell back to 2.9% Year over year from 3.5% year over year in the previous month. Excluding energy the PPI rate eased to 2.2% year over year from 2.4% year over year. More arguments then for the doves at the ECB, which are still urging caution in the light of subdued underlying inflation pressures.

The UK’s July construction PMI missed bigly, falling to 51.9 in the headline reading from 54.8 in June, and well off the median forecast for a much more moderate decline to 54.0. The outcome is the lowest since August last year, and shows a marked deceleration in the pace of expansion. New orders declined, the pace of job creation ebbed to an 11-month low, and commercial projects fell at the quickest pace in a year, and overall new business volumes contracted for the first time since the post Brexit vote rebound began in September last year. Optimism in the construction sector was the lowest since July last year, which was blamed on economic uncertainty. Investors will now be looking to the release of the services PMI, tomorrow, with the sector accounting for about 80% of UK GDP.