Bloomberg News

European Stocks Fall on Concern Region May Slip Into Recession

December 16, 2011

Dec. 16 (Bloomberg) -- European stocks retreated after Standard & Poor’s said the region’s economies may see a larger contraction in 2012, outweighing a report that showed U.S. inflation remains in check.

PSA Peugeot Citroen and Fiat SpA led a gauge of carmakers lower. Man Group Plc, the world’s largest hedge fund, fell 4.4 percent after Deutsche Bank AG recommended selling the stock. Kazakhmys Plc and Antofagasta Plc led mining shares higher, both jumping more than 3 percent.

The benchmark Stoxx Europe 600 Index declined 0.4 percent to 233.71 at the close in London. The gauge declined 2.8 percent this week on concern euro-area policy makers are struggling to contain the region’s debt crisis.

Stocks erased earlier gains after the S&P said the Netherlands, Germany, Belgium, Austria and Finland may see their gross domestic products suffering larger contraction next year. The austerity measures adopted across the euro region will imply that there won’t be any fiscal support for growth, it said.

National benchmark indexes fell in 13 of the 18 western- European markets. France’s CAC 40 lost 0.9 percent, Germany’s DAX dropped 0.5 percent and the U.K. FTSE 100 declined 0.3 percent.

U.S. Inflation

The cost of living in the U.S. stagnated in November as gasoline prices dropped, supporting the Federal Reserve’s view that inflation remains in check.

The unchanged reading in the consumer-price index last month followed a 0.1 percent decline the prior month, a report from the Labor Department showed today in Washington. That compares with a 0.1 percent increase forecast in a Bloomberg News survey of 82 economists. So-called core prices, which exclude food and energy costs, rose 0.2 percent, more than forecast, reflecting higher medical care and clothing costs.

“The core rates have climbed, but they’re still in a range in which the American central bank doesn’t see a need for immediate action,” Viola Stork, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in an e-mail.

In Italy, Prime Minister Mario Monti’s government won a confidence vote in Parliament on a 30 billion-euro ($39 billion) emergency budget plan aimed at spurring growth and cutting the euro-area’s second-biggest debt. A final vote will be held in the lower house at 7:30 p.m., and then the package will pass to the Senate, which will decide on it on Dec. 23.

Carmakers Decline

Peugeot dropped 1.7 percent to 11.81 euros and Fiat SpA declined 2.6 percent to 3.43 euros, after the two companies led the biggest decline in European car sales in five months. Michelin & Cie., the world’s second-largest tire maker, lost 2.9 percent to 42.94 euros. Faurecia SA, Europe’s biggest maker of car interiors, retreated 4.4 percent to 12.88 euros.

Registrations in November fell 3 percent to 1.07 million vehicles from 1.10 million a year earlier, the biggest decline since June, the Brussels-based European Automobile Manufacturers Association, or ACEA, said today.

Man Group slid 4.4 percent to 127.6 pence after Deutsche Bank cut the stock to “sell” from “buy.”

Essar Energy Plc slumped 4.5 percent to 184.9 pence, its lowest price since its listing in May 2010. Etablissements Maurel & Prom SA retreated 5.7 percent to 11.03 euros. Credit Suisse Group AG analysts led by Edward Westlake cut their price estimates for European integrated oil companies, citing “challenging” downstream business environment.

SAP, Commodity Shares

SAP AG lost 2.6 percent to 42.25 euros. The Financial Times Deutschland reported that the software maker doesn’t plan any major acquisitions after the takeover of SuccessFactors Inc., which was the company’s “big purchase.” The newspaper cited Bill McDermott, SAP’s co-chief executive officer.

Xstrata Plc gained 2.3 percent to 970 pence and Kazakhmys added 3.2 percent to 874 pence as copper and other base metals rose on the London Metal Exchange. Antofagasta jumped 3.7 percent to 1,172 pence. Rio Tinto Group Plc, the world’s second- biggest mining company, climbed 1 percent to 3,060 pence.

Klepierre SA, Europe’s second-largest shopping-center owner, increased 6 percent to 20.65 euros after Chief Executive Officer Laurent Morel said he expects a “good Christmas” for his company, and this may make up for a second half of 2011 that hasn’t been as strong as the first half.

Lanxess AG, the German chemical maker spun off from Bayer AG in 2005, rose 2.2 percent to 37.11 euros after Morgan Stanley raised the shares to “overweight” from “equal weight.”

Petroleum Geo-Services ASA, the world’s third-biggest surveyor of oil and gas fields, rallied 6.5 percent to 58.20 kroner after it predicted earnings before interest, taxes, depreciation and amortization will rise to the range of $650 million to $700 million in 2012.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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