Bloomberg News

European Stocks Slide to 2 1/2-Month Low; Sulzer, Total Retreat

June 10, 2011

June 10 (Bloomberg) -- European stocks tumbled, with the benchmark Stoxx Europe 600 Index falling for the seventh time in eight days to the lowest level in 2 1/2 months, amid concern about the strength of the economy.

Sulzer AG slumped 5 percent as the Swiss pumpmaker said Chief Executive Officer Ton Buechner will leave to join Akzo Nobel NV. Hermes International SCA sank 4.8 percent as LVMH Moet Hennessy Louis Vuitton SA said it doesn’t intend to make a takeover bid. Total SA, Europe’s third-largest oil company, fell 1.7 percent as crude plunged.

The Stoxx 600 slid 1.3 percent to 268.13 at the 4:30 p.m. close in London, extending this week’s drop to 2 percent. All 19 industry groups declined. The gauge has lost 4.6 percent this month, falling to the lowest level since March 18, as reports on U.S. employment and factory orders added to concern that the economy is faltering.

“There’s a lot of bearish sentiment around the macro environment that’s eating away at risk appetite,” said Henk Potts, an equity strategist at Barclays Wealth in London, which oversees $239 billion.

The 7.9 percent slump from this year’s high on Feb. 17 has dragged the Stoxx 600’s valuation to about 12.8 times its companies’ reported earnings, near the cheapest since 2008, according to data compiled by Bloomberg.

National benchmark indexes declined in all of the 18 western European markets today. Germany’s DAX fell 1.3 percent, while France’s CAC 40 retreated 1.9 percent. The U.K.’s FTSE 100 dropped 1.6 percent.

German Economy

Stocks briefly pared losses this morning as the Bundesbank raised its forecasts for German growth, saying Europe’s largest economy has entered a broad and prolonged upswing.

Gross domestic product will expand 3.1 percent this year and 1.8 percent in 2012, the Frankfurt-based central bank said in its bi-annual economic outlook. That compares with a February prediction by then Bundesbank President Axel Weber of 2.5 percent growth for this year and a December forecast of 1.5 percent for 2012.

German Finance Minister Wolfgang Schaeuble stepped up his calls for bondholders to assume a “fair” share of further Greek aid, setting Europe’s biggest economy on a collision course with the European Central Bank.

In a speech to parliament in Berlin evoking the spirit of German unity and European integration, Schaeuble appealed to lawmakers to back a second bailout for Greece to ensure a stable euro and bolster the global economy. In return, “we have to insist on the participation of the private sector,” he said.

Chinese Surplus

China reported a less-than-estimated $13.1 billion trade surplus in May, as surging imports signaled the nation’s demand may support global growth while adding pressure for higher interest rates. Inbound shipments climbed 28 percent from a year earlier and exports rose 19 percent, the customs bureau said on its website. The median estimate in a Bloomberg News survey of 23 economists was for a $19.3 billion surplus.

In the U.K., a report showed manufacturing output fell more than forecast in April. Factory output contracted 1.5 percent after rising 0.2 percent in March, the Office for National Statistics said. Economists were predicting a 0.1 percent drop, according to the median of 24 estimates in a Bloomberg survey.

Sulzer retreated 5 percent to 138.80 Swiss francs, a two- month low, after saying Buechner is leaving to replace Hans Wijers as chief executive of Akzo Nobel. Akzo shares slipped 1.2 percent to 47.88 euros.

Hermes, LVMH

Hermes sank 4.8 percent to 182.70 euros, the biggest drop this year. A spokesman for LVMH said the world’s largest maker of luxury goods does not intend to bid for Hermes, the bag maker in which it holds a 20.2 percent stake.

Total declined 1.7 percent to 38 euros and BP Plc dropped 1.8 percent to 442.05 pence. Crude tumbled the most in four weeks in New York after al-Hayat newspaper reported that Saudi Arabia will raise oil production to 10 million barrels a day next month.

Rio Tinto Group slid 2.3 percent to 4,104 pence as a gauge of mining stocks was the biggest decliner in the Stoxx 600. Australia’s Treasury said a planned 30 percent tax on profit from coal and iron ore at companies including BHP Billiton Ltd. and Rio Tinto will be introduced to parliament in the next six months. BHP lost 1.9 percent to 2,279.5 pence today.

ENRC Slides

Eurasian Natural Resources Corp., which earlier in the week voted against rehiring independent directors Richard Sykes and Kenneth Olisa, retreated 7.5 percent to 742 pence, the lowest since July 2009.

The Financial Times reported that Mehmet Dalman, also an independent director, is resigning his seat on the board over concerns about corporate governance at the company. The newspaper cited two people close to the situation.

Hays Plc rallied 2.9 percent to 109.2 pence, the largest gain since April, after the Daily Mail reported that Adecco SA may be lining up a 160 pence-per-share cash bid for the biggest U.K. recruitment company.

Stephan Howeg, a spokesman for Adecco, reiterated the world’s largest supplier of temporary workers may spend as much as 150 million euros ($217 million) on “bolt-on” acquisitions.

--With assistance from Corinne Gretler in Zurich. 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: Andrew Rummer at arummer@bloomberg.net


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