Bloomberg News

European Stocks Fall; Banks Lead Losses, Cairn Advances

April 03, 2012

European (SXXP) stocks dropped, paring the benchmark Stoxx Europe 600 Index’s biggest two-day rally since February, as Spanish bond yields rose and U.S. factory orders rebounded less than economists had estimated.

Banca Popolare di Milano Scarl (PMI) led a gauge of European (SXXP) banking shares lower. Ferrovial SA (FER) tumbled 6.4 percent as Spain’s government published its budget for 2012. Cairn Energy Plc gained 4 percent after agreeing to buy Agora Oil & Gas AS, which is owned by RIT Capital Partners Plc and Jacob Rothschild. Lonza Group AG (LONN) advanced 1.6 percent after it named Richard Ridinger as chief executive officer.

The Stoxx 600 (SXXP)fell 1.1 percent to 264.29 at the close in London, extending losses in the final hour of trading. The benchmark measure jumped 1.5 percent yesterday, completing its biggest two-day advance in two months, as reports showed manufacturing expanded more than forecast in the U.S. and China. The volume of shares changing hands in Stoxx 600-listed companies today was 3.4 percent lower than the average over the past 30 days, according to data compiled by Bloomberg.

“We could see some sideways trading, or even a bit of position squaring, before markets head into Easter holidays,” said Alessandro Fezzi, a senior market analyst at LGT Capital Management AG in Pfaeffikon, Switzerland. “Though investors have become slightly more cautious, sentiment remains quite robust. Let’s not forget that the scenario for the world economy, especially Europe, is still far from being brilliant or sustainable.”

National benchmark indexes fell in every western-European market apart from Denmark and Iceland. France’s CAC 40 Index lost 1.6 percent and the U.K.’s FTSE 100 Index slipped 0.6 percent. Germany’s DAX Index slid 1.1 percent. Spain’s IBEX posted the largest decline, falling 2.7 percent.

Stocks’ 2012 Rally

The Stoxx 600 has still increased 8.1 percent so far this year as the European Central Bank disbursed more than 1 trillion euros ($1.3 trillion) to the region’s lenders and amid better- than-expected U.S. economic data.

In the U.S., a report showed that factory orders rose 1.3 percent in February. That missed the median prediction for an increase of 1.5 percent from 60 economist estimates compiled by Bloomberg News.

After the close of European trading today, the Federal Open Market Committee will release minutes of its March 13 meeting when policy makers raised their assessment of the economy and repeated that the world’s largest economy may need “exceptionally low” interest rates through late 2014.

Spanish Unemployment Climbs

In Europe, a report said that registered unemployment in Spain, where more than half of young people are out of work, rose for the eighth month in March as the government deepened spending cuts and the economy tipped back into a recession. The number of people registering for jobless benefits increased by 38,769 to 4.75 million, the Labor Ministry in Madrid said today.

The yield on Spain’s 10-year bonds climbed 10 basis points to 5.45 percent. The nation’s debt will reach 79.8 percent of gross domestic product this year, up from 68.5 percent last year, the government said in its budget today.

The U.K. economy will probably avoid a recession this year, even though the government needs to do more to increase lending to help a “weak” recovery, the British Chambers of Commerce said.

Gross domestic product probably rose 0.3 percent in the first quarter after a 0.3 percent drop in the last three months of 2011, the group said today. The BCC forecast full-year growth of 0.6 percent, less than the 0.8 percent predicted by the government’s fiscal watchdog.

Bank Shares Retreat

Popolare di Milano tumbled 6.6 percent to 38.2 euro cents. A gauge of lenders contributed the most to the Stoxx 600’s retreat (SXXP) today. Banco Santander SA (SAN), Spain’s largest lender, retreated 4 percent to 5.55 euros. Intesa Sanpaolo SpA (ISP) dropped 4.7 percent to 1.27 euros and UniCredit SpA (UCG), Italy’s biggest bank, decreased 5 percent to 3.52 euros.

Ferrovial, the builder and airport operator, slumped 6.4 percent to 8.24 euros, its lowest price since May 2010, after Spain’s government capped corporate-tax deductions on financial costs to 30 percent of earnings before interest, taxes, depreciation and amortization.

Sodexo (SW), the French caterer whose clients include the U.S. Marine Corps, fell 2.3 percent to 60.67 euros after Morgan Stanley lowered its recommendation for the company’s shares to underweight, the equivalent of sell, from equal weight.

Cairn, the U.K. oil explorer which has spent $1 billion in Greenland without making a find, climbed 4 percent to 333.2 pence. The company agreed to buy Agora, a private Norwegian company with interests in the North Sea, for an enterprise value of $375 million. Cairn (CNE) will pay 43 percent in cash and 57 percent in shares.

Lonza, UCB

Lonza gained 1.6 percent to 47.85 Swiss francs after it named Ridinger, who has worked at BASE SE and Henkel AG, as chief executive officer with effect from May 1.

“We view it as positive that Lonza was able to appoint a new CEO so quickly,” Carla Baenziger, an analyst at Vontobel Holding AG, wrote in a note to clients. “With the hiring of Mr. Ridinger, Lonza again underpins its strategy to move more back into the chemicals sector.”

UCB SA (UCB) gained 1.5 percent to 34.33 euros. The Belgian drugmaker said that the U.S. Food and Drug Administration approved its Neupro medicine for the treatment of advanced stage idiopathic Parkinson’s disease.

Actelion Ltd. (ATLN), Switzerland’s largest biotechnology company, increased 2.7 percent to 34.46 francs as Credit Suisse Group AG raised the stock to outperform, the equivalent of buy, from neutral.

Novo Nordisk A/S (NOVOB), the world’s biggest insulin manufacturer, rose 2.4 percent to 835 kroner as analysts estimated that sales of its diabetes drug Victoza soared in the first quarter.

Novo, which reports first-quarter results on April 27, will probably say its Victoza sales doubled from a year earlier to 2.3 billion kroner ($412 million), Frank Hoerning Andersen, an analyst at Jyske Bank A/S, wrote in a note to clients.

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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