Bloomberg News

Most European Stocks Fall; Tesco Retreats as EON, RWE Advance

June 07, 2011

June 7 (Bloomberg) -- Most European stocks declined, with the benchmark Stoxx Europe 600 Index trading near a 10-week low, as losses in retail shares offset gains in utility companies.

Tesco Plc and Home Retail Group Plc fell as a report showed U.K. retail sales declined last month. Utilities posted the best performance among 19 industry groups in the Stoxx 600, gaining 1.2 percent. Mitchells & Butlers Plc surged 3.8 percent following a report that a group of investors may bid for the pub and restaurant owner.

The Stoxx 600 slid 0.1 percent to 271.87 at the 4:30 p.m. close in London as four shares retreated for every three that advanced. National benchmark indexes declined in 10 of the 18 western European markets today. Germany’s DAX Index added 0.3 percent, while France’s CAC 40 Index climbed 0.2 percent. The U.K.’s FTSE 100 Index rose less than 0.1 percent.

“Investors have probably overestimated risk in the last few days,” said Matthias Jasper, the head of equities at WGZ Bank AG in Dusseldorf. “The overall picture for equities is still good, though we can expect more volatility in the coming weeks.”

The Stoxx 600 has fallen 3.3 percent since the beginning of the month and is currently trading at about 13 times its companies’ reported earnings, near the cheapest valuation since April 2009, according to data compiled by Bloomberg. Fifty-eight percent of companies in the gauge that have announced earnings since April 11 have topped the average analyst estimate for per- share profit.

German Factory Orders

A report today showed factory orders in Germany, Europe’s largest economy, rebounded in April from a slump in March, led by stronger demand for investment goods. Orders, adjusted for seasonal swings and inflation, rose 2.8 percent from March, when they plunged a revised 2.7 percent, the Economy Ministry in Berlin said.

European Central Bank President Jean-Claude Trichet yesterday gave his first signal endorsing measures to encourage investors to buy new Greek bonds to replace maturing securities as officials seek to stem the nation’s debt crisis.

Central bank policy makers had opposed any measure that could be classed as a default to avoid what European Union Economic and Monetary Affairs Commissioner Olli Rehn said yesterday would be a “Lehman Brothers catastrophe.”

Greek Stocks

Greece yesterday unveiled the first step in a privatization program that aims to raise 50 billion euros ($73 billion) from state asset and real-estate sales by the end of 2015. Prime Minister George Papandreou’s government will sell a 10 percent stake in Hellenic Telecommunications Organization SA, which is also known as OTE, to Deutsche Telekom AG for about 400 million euros.

Greece’s ASE Index lost 2 percent today, led by declines in OTE and banks. OTE plunged 6.2 percent to 6.46 euros. Alpha Bank SA and National Bank of Greece SA sank 2.6 percent to 3.40 euros and 4.1 percent to 4.92 euros, respectively.

Tesco, the world’s third-biggest retailer by sales, slipped 1.3 percent to 412 pence. Home Retail Group, the owner of British store chains Homebase and Argos, lost 1.6 percent to 208.5 pence. U.K. retail sales fell in May as consumers’ uncertainty about their jobs and incomes increased, the British Retail Consortium said. Sales at stores open at least 12 months, measured by value, fell 2.1 percent from a year earlier, compared with a 5.2 percent increase in April, the BRC said.

Clariant Slides

Clariant AG lost 2.3 percent to 18.42 Swiss francs after Chief Executive Officer Hariolf Kottmann vowed to make acquisitions to push annual sales beyond 10 billion francs ($11.9 billion) by 2015, and margins of more than 17 percent.

EON AG and RWE AG, Germany’s biggest electricity companies, led gains in utilities. The stocks jumped 3.2 percent to 19 euros and 2.2 percent to 38.70 euros, respectively. The German utilities had fallen for four consecutive days as Chancellor Angela Merkel proceeded with a plan to close the country’s nuclear power plants by 2022.

Mitchells & Butlers jumped 3.8 percent to 331.9 pence, the largest advance in four months. The Daily Mail said the U.K. owner of Harvester and Toby Carvery pubs and restaurants may get a 1.7 billion-pound ($2.8 billion) cash bid from Irish investors J.P. McManus and John Magnier alongside Joe Lewis in a group with a private equity firm, possibly KKR & Co. The newspaper didn’t say where it got the information.

Sky Deutschland, Infineon

Sky Deutschland AG jumped 3.4 percent to 3.38 euros as Goldman Sachs Group Inc. upgraded the pay-TV operator to “conviction buy” from “neutral.”

Infineon Technologies AG rose 1.4 percent to 7.89 euros as Chief Executive Officer Peter Bauer said Europe’s second-biggest chipmaker will increase its sales by more than 10 percent a year in the long term, during a web cast of the company’s investor day in Munich. He also forecast a margin of about 20 percent in the long term.

Renewable Energy Corp. ASA surged 5.6 percent to 12.17 kroner as Morgan Stanley upgraded the maker of solar-energy wafers, cells and modules to “overweight” from “equal weight.”

Stora Enso Oyj, Europe’s biggest papermaker, gained 2.2 percent to 7.30 euros. Mondi Plc, Europe’s largest maker of office paper, climbed 1.9 percent to 614.5 pence.

International Paper Co., the world’s largest pulp-and-paper maker, made a $3.31 billion hostile takeover bid for Temple- Inland Inc. to expand its production of the containerboard used in shipping boxes.

Alstom SA advanced 1.5 percent to 41.93 euros after saying it signed a 500 million-euro contract to build a power plant in Israel for Dalia Power Energies Ltd.

Federal Reserve Chairman Ben S. Bernanke is scheduled to discuss the U.S. economic outlook at the International Monetary Conference today in Atlanta as the bank’s second round of bond buying, called quantitative easing or QE2, ends this month.

--With assistance from Giles Broom in Zurich. Editors: Will Hadfield, Andrew Rummer

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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