European Stocks Drop for Second Day; Nestle, Unilever Decline
July 29, 2010, 1:05 PM EDTBy Adam Haigh
July 29 (Bloomberg) -- European stocks fell for a second day as food and basic-resource companies retreated and concern mounted that tomorrow’s U.S. gross domestic product report may show growth slowed in the world’s largest economy.
Nestle SA and Unilever slid more than 1.5 percent after U.S. rivals Kellogg Co. and Colgate-Palmolive Co. reported revenue that missed estimates. Vallourec SA dropped 3.1 percent after saying a recovery in the steel industry will slow. Telefonica SA, Europe’s second-biggest phone company, and Cap Gemini SA, the region’s largest computer-services company, gained more than 3 percent on increased earnings.
The Stoxx Europe 600 Index slid 0.4 percent to 256.26 at the 4:50 p.m. close in London, erasing gains in the last hour of trading. The gauge has declined 5.8 percent from this year’s high on April 15 amid concern that austerity measures from indebted European governments will harm the economic recovery.
“With U.S. GDP data due out tomorrow a more cautious tone has prevailed,” said David Jones, London-based chief market strategist at IG Index. “With the strength of economic recovery still something of a hot potato for investors, it’s not surprising that plenty are deciding to stay out of the market until this release is out of the way.”
The Federal Reserve said yesterday in its Beige Book business survey that U.S. economic growth slackened in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers.
U.S. Economy
The central bank’s report followed data this week on durable-goods orders and consumer confidence that trailed economists’ forecasts, fueling concern that the U.S. recovery may be stalling.
Tomorrow’s GDP report may show the U.S. economy grew at an annual rate of 2.6 percent in the second quarter, according to a Bloomberg survey of economists. That follows a 2.7 percent increase in the first quarter.
National benchmark indexes fell in 12 of the 18 western European markets. Germany’s DAX lost 0.7 percent and France’s CAC 40 dropped 0.5 percent. The U.K.’s FTSE 100 slipped 0.1 percent.
Nestle, the world’s biggest food company, fell 1.7 percent to 51.65 Swiss francs, the biggest drop in four weeks and Unilever, the second-largest consumer goods company, slid 2.4 percent to 1,821 pence.
Kellogg, the biggest U.S. maker of breakfast cereal, and Colgate, the largest toothpaste maker, reported sales that missed analysts’ projections.
Steelmakers Drop
Vallourec, a French producer of steel pipes for the oil and gas industry, slumped 3.1 percent to 77.02 euros after saying a recovery in the steel industry would slow, hurting second-half earnings.
Norsk Hydro ASA, Europe’s third-largest aluminum maker, tumbled 5 percent to 32.04 kroner, the biggest drop since February. ArcelorMittal, the world’s biggest steelmaker, dropped 2.2 percent to 23.67 euros.
Statoil ASA dropped 4.1 percent to 126 kroner as Norway’s largest oil and gas company cut its production forecast for 2012 and reported profit that missed estimates.
Neste Oil Oyj retreated 5.8 percent to 11.60 euros after Finland’s only oil refiner reported a wider-than-expected second-quarter net loss.
Puma AG plunged 6.1 percent to 221.60 euros as Europe’s second-largest sporting-goods maker posted earnings that missed estimates and canceled a forecast for pretax profit.
Telecinco, Peugeot
Gestevision Telecinco SA dropped 6.8 percent to 8.88 euros, the biggest decline this month, as Spain’s largest commercial television station reported earnings that missed estimates.
BofA Merrill Lynch Global Research cut its recommendation on the shares to “underperform” from “neutral.”
PSA Peugeot Citroen, Europe’s second-biggest carmaker, dropped 3 percent to 23.15 euros after also being downgraded to “underperform” from “neutral” at BofA Merrill.
Telefonica advanced 3.2 percent to 17.55 euros after posting a 16 percent gain in second-quarter profit on units in Latin America. Net income rose to 2.12 billion euros ($2.8 billion), topping the 1.94 billion-euro average of 13 estimates in a Bloomberg survey of analysts.
Cap Gemini soared 7.3 percent to 36.35 euros after increasing its profitability forecast as first-half net income rose. Operating margin “should exceed 6.5 percent” for 2010 as a whole, the Paris-based company said. Cap Gemini had earlier targeted a margin rate between 6 percent and 6.5 percent.
Volkswagen, France Telecom
Volkswagen AG’s preferred shares climbed 3.1 percent to 80.99 euros. Europe’s largest carmaker reported the biggest quarterly profit in two years on higher demand in China and the U.S. for the Golf compact and Audi A5 coupe.
France Telecom SA jumped 5.5 percent to 16 euros. The country’s biggest phone operator said it will maintain its per- share annual dividend of 1.40 euros through 2012 as second- quarter profit slipped 2.5 percent.
AstraZeneca Plc rallied 2.7 percent to 3,289 pence after winning U.S. backing to sell its experimental blood-thinner Brilinta. The U.K.’s second-biggest drugmaker also reported second-quarter earnings that exceeded estimates, raised its earnings forecast for the third time this year and doubled a share buyback plan.
PartyGaming Plc soared 20 percent to 309.5 pence after agreeing to merge with Bwin Interactive Entertainment AG, an Austrian online bookmaker. Bwin jumped 18 percent to 42 euros, the biggest gain in 10 years.
--With assistance from Maryam Nemazee and Sarah Jones in London. Editor: Andrew Rummer.
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.
