UKX FTSE 100 Index

By Carla Mozee, MarketWatch

European stocks moved lower Tuesday, weighed by the heightened prospect that the U.K. will leave the European Union's single market when Britain exits the bloc.

The Stoxx Europe 600 fell 0.4% to 361.42 as no sector traded higher. Telecom, basic material and consumer-related shares were losing the most ground. On Monday, the pan-European benchmark slumped Monday, losing fell 0.8% (http://www.marketwatch.com/story/european-stocks-decline-as-banks-auto-makers-struggle-2017-01-16) as auto makers and bank shares fell.

British Prime Minister Theresa May, in a speech she'll deliver Tuesday, will say the U.K. doesn't want "partial membership" in the EU "or anything that leave us half-in, half out," according to excerpts released by her office (http://www.marketwatch.com/story/uk-pms-may-set-to-say-britain-will-leave-eus-single-market-2017-01-17). May has previously said she wants to signal the start of Brexit negotiations by the end of March.

The British pound was also a focus for investors ahead of her speech, expected at 11:45 a.m. London time, or 7.45 a.m. Eastern Time. Sterling was buying $1.2137, up from $1.2046 on Monday, when the British currency dropped by more than 1% intraday.

"[W]e now expect the reaction in GBP during the actual speech to be somewhat limited, and the short covering may continue in the aftermath of the event," said Charalambos Pissouros, senior analyst at IronFX, in a note.

"Having said that though, the broader trend remains negative and hence, we would treat any such positive reaction as a corrective phase," he said.

Movers: Zalando SE shares (ZAL.XE) dropped 4% as growth in quarterly revenue and adjusted earnings fell short of expectations (http://www.marketwatch.com/story/zalando-earnings-revenue-rise-in-holiday-shopping-2017-01-17) at the German online fashion and accessories retailer.

Rolls-Royce Holdings PLC shares (RR.LN) jumped 5.2% after the jet-engine maker said Monday it will pay $810 million to settle corruption investigations (http://www.marketwatch.com/story/rolls-royce-to-make-800-million-settlement-in-corruption-probe-2017-01-17)with U.S., British and other authorities.

British American Tobacco shares (BATS.LN) turned down 0.2% after the company said it will pay $49.4 billion for the 57.8% of Reynolds American Inc (http://www.marketwatch.com/story/bat-to-pay-49-bln-for-full-control-of-reynolds-2017-01-17).(RAI) that it doesn't already own. The move comes after BAT said in October it had made an offer for Reynolds valued at $56.50 a share, or about $47 billion, for the outstanding stake.

Intertek Group PLC (ITRK.LN) fell 2.8% after Credit Suisse downgraded the product testing company to underperform from outperform. The industry facing "headwinds to near-term growth, potential disruption to international trade and relative valuation," Credit Suisse said.

Alstom SA (ALO.FR) was down 3%. The French train maker said sales rose 3.1% in the three months through December, a slower pace than in the previous six months. (http://www.marketwatch.com/story/alstom-sales-up-31-but-growth-slows-2017-01-17)

Indexes: Germany's DAX 30 fell 0.6% to 11,488.68, and the U.K's FTSE 100 gave up 0.3% at 7,302.30. France's CAC 40 lost 0.5% to 4,857.62, while Spain's IBEX 35 shed 0.1% to 9,397.10.

The euro changed hands at $1.0658, little changed from $1.0656 late Monday.

Economic data: The ZEW indicator of German economic expectations rose to 16.6 in January, compared with 13.8 in December.

Annual inflation accelerated (http://www.marketwatch.com/story/uk-inflation-hits-2-year-high-beats-views-2017-01-17) to 1.6% in December from 1.2% a month earlier, the U.K.'s Office for National Statistics said Tuesday, the fastest increase in prices since July 2014.

Eurozone banks expect credit standards to ease (http://www.marketwatch.com/story/eurozone-banks-see-credit-standards-easing-ecb-2017-01-17) in the current quarter, while demand for funding is also expected to pick up, the European Central Bank's Bank Lending Survey found Tuesday.

(END) Dow Jones Newswires

January 17, 2017 05:40 ET (10:40 GMT)

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