Bloomberg News

European Stocks Decline as BHP, AstraZeneca Drop; Nokia Climbs

January 28, 2010

European stocks fell for a second day as basic-resources companies tumbled and AstraZeneca Plc (AZN)’s sales forecast disappointed investors, overshadowing better-than-estimated earnings at Nokia Oyj (NOK1V) and Hennes & Mauritz AB. (HMB)

BHP Billiton Ltd. (BHP) and ArcelorMittal (MT) retreated more than 2 percent amid lower metals prices. AstraZeneca slid 4.6 percent after the U.K. drugmaker’s fourth-quarter profit missed analysts’ projections. Nokia, the world’s largest maker of mobile phones, and H&M, Europe’s second-biggest clothing retailer, jumped more than 8 percent.

The Dow Jones Stoxx 600 Index slipped 1.1 percent to 244.61. The measure has declined 6 percent from this year’s high on Jan. 19, bringing its 2010 drop to 3.7 percent, as U.S. President Barack Obama proposed limits on risk-taking by banks and China moved to restrict lending and cool the fastest economic growth since 2007.

“The trends are still intact in economy but the whole thing is getting more bumpy and markets are more nervous,” said Manfred Hofer, head of equity analysis at LGT Capital Management in Pfaeffikon, Switzerland. “It will be a challenging year. The downward trend of the last few days could last another few weeks before we go back up.”

Stocks rallied earlier after Obama used his first State of the Union address to call for an extension of tax incentives worth $38 billion over this year and next. The Federal Open Market Committee yesterday repeated their pledge to keep the benchmark lending rate in a range of zero to 0.25 percent “for an extended period,” while noting the economy “continued to strengthen.”

Greek Bonds

National benchmark indexes declined in 13 of the 18 western European markets. France’s CAC 40 lost 1.9 percent and the U.K.’s FTSE 100 dropped 1.4 percent. Germany’s DAX slipped 1.8 percent as K+S AG (SDF) tumbled.

The euro fell to a six-month low against the dollar and fell versus the yen as Greece’s and Portugal’s deficits encouraged a retreat from riskier assets. Greek bonds slumped for a third day and the cost to insure the country’s debt rose to a record after Prime Minister George Papandreou said the government doesn’t need to borrow from European nations to curb its budget deficit.

BHP Billiton, the largest mining company, dropped 2.4 percent to 1,842.5 pence. ArcelorMittal, the biggest steelmaker, slid 3.7 percent to 27.80 euros. Copper fell for a third day in New York and London on speculation that China and the U.S. will withdraw economic stimulus, potentially curbing demand. Basic-resources shares were the worst performers among 19 industry groups in the Stoxx 600.

AstraZeneca

AstraZeneca sank 4.6 percent to 2,905 pence. The drugmaker plans to buy back as much as $1 billion of shares this year. Profit excluding some items of $1.42 a share missed the $1.54 average estimate of 20 analysts surveyed by Bloomberg.

The percentage drop in sales this year will be “mid-single digits” because of generic competition to drugs such as the Arimidex cancer treatment. Analysts surveyed by Bloomberg predicted a 1.4 percent decline on average.

Lonza Group AG (LONN) declined 5 percent to 75.5 Swiss francs. The world’s biggest maker of drug ingredients said full-year net income fell by more than half to 162 million francs ($154 million) from 420 million francs as customers canceled contracts and the company cut prices.

Nokia soared 9.9 percent to 9.91 euros, leading a gauge of technology stocks to the biggest gain among the Stoxx 600 industry groups. The company reported fourth-quarter net income of 948 million euros ($1.33 billion), beating the average estimate of 572 million euros. Sales of 12 billion euros also exceeded analyst forecasts.

Potash Corp.

H&M rallied 8.4 percent to 436 kronor. The retailer reported fourth-quarter net income of 6.15 billion kronor ($844 million), topping the 5.1 billion-krona average estimate of 18 analysts surveyed by Bloomberg.

Banking shares erased earlier gains after Standard & Poor’s Ratings Services said it doesn’t see the U.K. “among the most stable and low-risk banking systems globally,” depressed by a drop in demand for commercial aircraft.

SKF AB (SKFB), the world’s largest maker of ball bearings, sank 7 percent to 112.40 kronor, the sharpest drop in the Stoxx 600, after fourth-quarter net income of 476 million kronor missed the mean estimate of 615 million kronor.

K+S, Europe’s biggest potash producer, slipped 3.5 percent to 39.86 euros, while Yara International ASA lost 2.3 percent to 238.90 kroner. Potash Corp. (POT) of Saskatchewan Inc., the world’s largest producer of its namesake crop nutrient, said fourth-quarter profit dropped 69 percent because of lower demand and reduced prices.

Tate & Lyle

Tate & Lyle Plc (TATE), maker of the low-calorie sweetener Splenda, fell 4.5 percent to 388.7 pence after saying shrinking volumes in the Americas would erode full-year operating profit.

Coloplast A/S (COLOB), the world’s largest maker of ostomy and urology products, jumped 14 percent to 576 kroner, the steepest gain on record. The Danish company boosted its full-year revenue and profit-margin forecasts and reported higher-than-expected profit for its fiscal first quarter.

Arriva Plc, operator of the U.K.’s longest train route, advanced 2.9 percent to 481.4 pence. The company said it’s held talks with SNCF about a possible bid for the French state rail company’s Keolis unit, which runs buses, trains and trams in seven European countries.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.


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