Bloomberg News

European Stocks Retreat as German Bund Auction Misses Target

November 24, 2011

Nov. 23 (Bloomberg) -- European stocks declined, with the benchmark Stoxx Europe 600 Index posting its longest losing streak since August, as Germany failed to attract sufficient bids at an auction of benchmark 10-year bunds.

Rio Tinto Group, the world’s second-largest mining company, dropped 2.3 percent as Australia’s lower house of parliament passed legislation introducing a tax on coal and iron-ore profits. Logica Plc, the Anglo-Dutch computer services provider, slid 4.2 percent after Jefferies Group Inc. cut its recommendation on the shares. Dexia SA jumped 13 percent.

The Stoxx 600 declined 1.3 percent to 220.31 at the close in London, for a fifth day of losses. The benchmark index has tumbled 7.1 percent over the last five trading days as Italian, Spanish and French bond yields soared, adding to concern that the debt crisis is spreading to the euro area’s larger economies.

Germany failed to reach its maximum sales target of 6 billion euros ($8 billion) at an auction of securities due in January 2022. Total bids amounted to 3.889 billion euros, falling short by 35 percent, according to data from the Bundesbank. The securities were sold at a yield of 1.98 percent.

“This is another drip of negative news into the cup,” said David Finch, head of cross-sector research at Exane BNP Paribas in Paris. “It’s an extension of the contagion we’ve seen into more of the stable euro-zone countries. It’s kind of an acceleration of risk aversion.”

National Indexes

National benchmark indexes fell in 17 of the 18 western- European markets. France’s CAC 40 Index slipped 1.7 percent. Germany’s DAX Index dropped 1.4 percent. The U.K.’s FTSE 100 Index slid 1.3 percent.

In Asia, a preliminary purchasing managers’ index indicated that Chinese manufacturing will contract in November by the most since March 2009 as home sales slide, adding to evidence the world’s second-biggest economy is slowing. The reading of 48 reported by HSBC Holdings Plc and Markit Economics for November compares with a final number of 51 for October. A number below 50 indicates contraction.

The European Central Bank bought Italian government bonds, according to three people with knowledge of the transactions, who declined to be identified because the trades are confidential. A spokesman for the ECB in Frankfurt declined to comment today on asset purchases.

A preliminary reading of a euro-area composite index from a survey of purchasing managers in manufacturing and services rose to 47.2 in November from 46.5 in October, London-based Markit Economics said today.

U.S. Durable Goods

In the U.S., a Commerce Department report showed durable goods orders fell 0.7 percent in October, less than the 1.2 percent drop economists had predicted. A separate release showed consumer spending rose last month less than economists had forecast as Americans rebuilt their savings, indicating the biggest part of the economy may contribute less to the recovery.

The Thomson Reuters/University of Michigan final index of consumer sentiment for November rose to 64.1 from a final October reading of 60.9. That fell short of the average economist estimate for a reading of 64.5.

Rio Tinto slipped 2.3 percent to 2,985.5 pence and BHP Billiton Ltd. declined 1.4 percent to 1,741 pence. The world’s two largest mining companies and other commodity producers face A$11 billion ($10.7 billion) of extra charges in the first three years of Australia’s tax on iron-ore and coal profits.

Logica fell 4.2 percent to 67.6 pence after the stock was cut to “underperform” from “hold” at Jefferies and Co.

Halfords Group Plc dropped 5.1 percent to 314.1 pence. The shares were cut to “sell” from “neutral” at UBS, which cited the company’s limited strategic options for growth.

Dexia Shares Rally

Dexia jumped 13 percent to 26.9 euro cents. Luxembourg’s Finance Minister Luc Frieden said that talks about the government-backed funding of the remaining assets do not face “insurmountable difficulties.”

“I am sure that within the next days or so this deal can be concluded in a satisfactory manner,” Frieden said in an interview today in Luxembourg, referring to talks to sell Dexia Banque Internationale a Luxembourg SA to a group of investors including members of Qatar’s royal family.

Tui Travel Plc, Europe’s largest tour operator, rallied 13 percent to 154 pence, its biggest advance since October 2008, as analysts said concern over the future of rival Thomas Cook Group Plc may present an opportunity to gain market share.

“Whatever unfolds at Thomas Cook, there is likely to be a market share opportunity for Tui Travel,” Nick Batram, an analyst at Peel Hunt in London, wrote in a note.

--With assistance from Corinne Gretler in Zurich. Editors: Will Hadfield, Srinivasan Sivabalan

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

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


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