Bloomberg News

European Stocks Decline on Economy, Extending Quarterly Slump

September 30, 2011

Sept. 30 (Bloomberg) -- European stocks fell, extending the Stoxx Europe 600 Index’s largest quarterly decline since 2008, as reports on Chinese manufacturing and German retail sales added to concern the economy is slowing.

Deutsche Bank AG lost 6.8 percent as Handelsblatt reported that Germany’s biggest lender may lower its profit target. Metro AG slid 4.3 percent after German retail sales declined the most in more than four years in August. Royal Philips Electronics NV tumbled 4.1 percent as HSBC Holdings Plc cut its earnings estimates for the company.

The Stoxx 600 fell 1.2 percent to 226.18 at the 4:30 p.m. close in London. The measure has rallied 4.6 percent this week as policy makers increased efforts to contain the region’s debt crisis and U.S. jobs and growth data exceeded forecasts. The gauge still posted the biggest quarterly decline since 2008, having plunged 17 percent since the end of June. The index dropped 4.7 percent in September, a fifth month of losses.

“The situation is quite dark right now,” said Philipp Musil, who helps manage about $11 billion at Semper Constantia Privatbank AG in Vienna. “We’re very cautious about equities. All in all the figures are not good and many investors think we’re going straight into a recession.”

National benchmark indexes retreated in every western European market, except Iceland. Germany’s DAX Index slid 2.4 percent, while the U.K.’s FTSE 100 Index dropped 1.3 percent and France’s CAC 40 fell 1.5 percent.

Chinese Economy

In China, the reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week. The gauge was below 50, the level that separates expansion from contraction, for eight months through March 2009.

European inflation unexpectedly accelerated to the fastest in almost three years in September, complicating the European Central Bank’s task as it fights the region’s worsening sovereign-debt crisis. The euro-area inflation rate jumped to 3 percent from 2.5 percent in August, the European Union’s statistics office said. That’s the biggest annual increase in consumer prices since October 2008.

Deutsche Bank slid 6.8 percent to 26.32 euros. The bank may lower its target for achieving a record 10 billion euros ($13.6 billion) in profit this year, Handelsblatt reported, citing unidentified people close to the management board.

Christian Streckert, a spokesman for the bank, declined to comment on “market speculation,” when reached by Bloomberg.

French Banks

BNP Paribas SA and Societe Generale SA, France’s biggest banks, fell 3.5 percent to 30.05 euros and 5.1 percent to 20 euros, respectively. UBS AG downgraded Societe Generale to “neutral” from “buy” and cut its price forecast on the stock to 21 euros from 35 euros, while reducing its price estimate on BNP to 31 euros from 36 euros.

Metro, Germany’s largest retailer, dropped 4.3 percent to 31.93 euros. German retail sales, adjusted for inflation and seasonal swings, slumped 2.9 from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast a 0.5 percent decline, according to the median of 18 estimates in a Bloomberg survey.

Philips slumped 4.1 percent to 13.55 euros in Amsterdam trading after HSBC cut its earnings estimates by 20 percent to 30 percent for the next two years and predicted “many challenges” for the Dutch electronics company.

“Philips’ figures could certainly be better and generally more and more earnings are being revised down,” said Markus Huber, head of German sales trading at ETX Capital in London. “I wouldn’t be surprised if the company cut its forecast. Consumers might scale back in the short term because of the prevailing uncertainty.”

Luxuries Drop

Luxury-goods stocks declined as the gauge of Chinese manufacturing indicated a contraction. Swatch AG slid 7 percent to 302.30 francs. The world’s largest watchmaker makes 33 percent of its revenue in greater China, according to Bloomberg data. Burberry Group Plc, the U.K.’s largest luxury-goods maker, lost 2.3 percent to 1,174 pence. The company makes 33 percent of its revenue in the Asia Pacific region, Bloomberg data shows.

Bayerische Motoren Werke AG and Daimler AG, the world’s biggest makers of luxury cars, led declines in European automakers as the industry posted the worst performance of all 19 groups in the Stoxx 600. BMW slid 5.3 percent to 49.97 euros while Daimler fell 3.4 percent to 33.63 euros. Daimler sells 10 percent of its vehicles in China, Bloomberg data show.

Lundin Petroleum AB surged 32 percent to 117.60 kronor in Stockholm, the biggest gain on record, after increasing its estimate of recoverable resources for the North Sea Avaldsnes oil prospect.

--With assistance from Cecile Vannucci in Amsterdam. Editors: Andrew Rummer, Srinivasan Sivabalan

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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