Bloomberg News

European Stocks Sink as Report Shows U.S. Jobs Growth Stagnates

September 02, 2011

Sept. 2 (Bloomberg) -- European stocks plunged, paring the biggest weekly rally since July, as a report showing no growth in U.S. jobs spurred concern that the world’s largest economy won’t help offset weakness caused by the sovereign-debt crisis.

Barclays Plc and Credit Agricole SA tumbled more than 7 percent as European sovereign default risk climbed to a record. AstraZeneca Plc slumped 3.7 percent after the drugmaker reported study results for its Crestor treatment. Carmakers and construction companies helped lead drops among industry groups with profits most tied to economic growth.

The Stoxx 600 sank 2.4 percent to 233.11 at the 4:30 p.m. close in London. The gauge has still gained 3.4 percent this week, its biggest weekly jump since July, as investors speculated that the rout which had left the gauge trading at as little as 9.1 times its estimated earnings wasn’t commensurate with the prospect for profit growth.

“For the stock markets, this highlights the high uncertainty we’re facing,” said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which oversees $74 billion. “The economic recovery in the U.S. is still weak and vulnerable.”

European sovereign default risk rose to a record with the Markit iTraxx SovX Western Europe Index of credit-default swaps insuring the debt of 15 governments rising 11 basis points to 310, surpassing an all-time high closing price of 308 on Aug. 26.

The Stoxx 600 declined 10 percent in August, its largest monthly retreat since October 2008, amid concern global economic growth is slowing as Europe’s sovereign-debt crisis spread. The gauge has traded at an average multiple of 12.1 over the past five years.

Banks May Be Sued

In the U.S., more than a dozen large banks may be sued by the Federal Housing Finance Agency for misrepresenting the quality of mortgage securities sold at the height of the housing bubble, the New York Times reported. Bank of America Corp., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Deutsche Bank AG are among firms that will be targeted by the suits that the agency will file in coming days. The agency will seek billions of dollars in compensation, the newspaper said, citing three people briefed on the matter that it didn’t identify.

U.S. Jobs, Unemployment

Stocks extended their losses today after a Labor Department report showed that the U.S. unemployment rate remained unchanged at 9.1 percent in August. The release also showed that the world’s largest economy added no jobs last month. Economists had forecast that employers would add 68,000 jobs, according to the median estimate in a Bloomberg News survey.

Investors should buy stocks as valuations suggest low economic growth is already accounted for in the price, wrote HSBC Holdings Plc equity strategist Garry Evans in a note.

Earnings at U.S. companies can buck the trend of weak economic growth as 33 percent of their sales last year came from outside the country and almost 50 percent of European company profits came from outside the region, Evans wrote in a report today.

National benchmark indexes declined in every western- European market except Portugal. The U.K.’s FTSE 100 Index lost 2.3 percent, Germany’s DAX Index declined 3.4 percent and France’s CAC 40 Index retreated 3.6 percent.

Barclays slumped 8.4 percent to 165.2 pence, halting a three-day rally, while Credit Agricole lost 7.4 percent to 6.19 euros. Lloyds Banking Group Plc slid 7.1 percent to 33.12 pence and Royal Bank of Scotland Group Plc dropped 5.4 percent to 24.84 pence. Deutsche Bank, Germany’s largest lender, tumbled 5.9 percent to 26.02 euros.

AstraZeneca, Carmakers Fall

AstraZeneca lost 3.7 percent to 2,809.5 pence after the London-based company said Crestor showed a benefit over Pfizer Inc.’s Lipitor in a study, though by one measure the result wasn’t statistically significant.

Gauges of carmakers and construction companies on the Stoxx 600 declined 4.6 percent and 3.6 percent, respectively. Peugeot SA lost 6 percent to 19.86 euros. Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, retreated 6 percent to 32.96 euros.

Straumann Holding AG dropped 5.6 percent to 144.50 Swiss francs after Goldman Sachs downgraded the shares to “sell” from “buy.”

Bilfinger Berger SE declined 4.1 percent to 56.56 euros following a report that the company might spend 1 billion euros ($1.4 billion) on acquisitions over the next two years. The Financial Times Deutschland cited Chief Executive Officer Roland Koch as saying Bilfinger seeks opportunities for its building- services business in Italy and the U.K.

--With assistance from Cecile Vannucci in Amsterdam. Editor: Will Hadfield

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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