Bloomberg News

European Stocks Decline as Fed Damps Stimulus Optimism

July 12, 2012

European stocks declined the most in more than two weeks as minutes released by the Federal Reserve disappointed investors seeking a more definitive signal for further quantitative-easing measures.

Temenos Group AG plunged 28 percent to a three-year low after reducing its estimate for 2012 revenue growth and saying its chief executive officer quit. Ashmore Group Plc (ASHM) dropped 6.7 percent after the fund manager reported a drop in assets. Aegis Group Plc surged 45 percent, the most in 21 years, after Japan’s Dentsu Inc. agreed to buy the company.

The Stoxx Europe 600 Index (SXXP) fell 1.1 percent to 252.89 at the close in London, the biggest retreat since June 25. The benchmark measure has retreated 0.6 percent this week, after a five-week rally, as concern mounted the slowing economic growth will curb earnings in the U.S. and Europe.

“It was clear that the Fed would not take any actions because they already have the Operation Twist program,” said Andreas Lipkow, an equity trader at MWB Fairtrade Wertpapierhandelsbank AG in Frankfurt. “Some market participants hoped that the Fed would give some signals for further actions.”

The Federal Open Market Committee said on June 20 it will expand Operation Twist to extend the maturities of assets on its balance sheet, and it stands ready to take further action as needed.

Stimulus Debate

Officials debated the need for further stimulus measures at last month’s meeting, minutes released yesterday in Washington showed. Two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.

FOMC members said strains in global markets stemming from the euro-area debt crisis had increased since their April meeting, and that “U.S. fiscal policy would be more contractionary than anticipated.”

“The markets are getting more and more short-lived in terms of their positive reaction to stimulus,” said Andreas Utermann, Frankfurt-based global chief investment officer at Allianz Global Investors, which overseas about $349 billion. “I think the Fed will wait until at least September to see further confirmation of a slowdown,” he said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua.

National benchmark indexes fell in 16 of the 18 western European markets. The U.K.’s FTSE 100 dropped 1 percent. France’s CAC 40 slid 0.7 percent and Germany’s DAX retreated 0.5 percent.

Jobless Claims

U.S. applications for jobless benefits decreased by 26,000 in the week ended July 7 to 350,000, the fewest since March 2008, Labor Department figures showed today. Economists had forecast 372,000 claims, according to the median estimate in a Bloomberg News survey.

In China, banks extended 919.8 billion yuan ($144.3 billion) of local-currency loans in June, the People’s Bank of China said today. That compares with the 880 billion-yuan median forecast in a Bloomberg News survey and 793.2 billion yuan in May.

Temenos (TEMN) declined 28 percent to 10.25 Swiss francs, the lowest price and the biggest decrease since the first quarter of 2009, after reducing its forecast for 2012 revenue growth to a range of minus 5 percent to plus 1 percent, compared with an earlier forecast of minus 5 percent to plus 6 percent. The company also said CEO Guy Dubois will step down for personal reasons and be replaced by David Arnott, who’s currently the chief financial officer.

Temenos Downgrades

Temenos shares were cut to underperform, the equivalent of sell, at Bank of America Corp., to neutral at Helvea AG and to sell at Bankhaus Metzler. All of them had a buy rating on the equity earlier. Vontobel Holding AG and Exane BNP Paribas cut their price targets for the stock.

Cap Gemini SA (CAP), France’s biggest computer-services company, declined 2.9 percent to 26.23 euros.

Infosys Ltd. (INFY:US), India’s second-biggest software exporter, cut its sales forecast and reported fiscal first-quarter profit that missed estimates.

Ashmore tumbled 6.7 percent to 307.8 pence, the lowest since October. The U.K. fund manager said assets under management fell 3.3 percent to $63.7 billion in the fourth quarter.

A gauge of mining companies fell 2.8 percent for the worst performance among the 19 industry groups on the Stoxx 600. Rio Tinto Group, the world’s third-biggest mining company, dropped 3.5 percent to 2,926 pence. Chief Financial Officer Guy Elliott will retire at the end of next year, the company said.

BHP Drops

BHP Billiton, the world’s largest mining company, lost 3.3 percent to 1,751 pence. The stock was cut to neutral from outperform at Credit Suisse Group AG.

Telecom Italia SpA (TIT) led telecommunication stocks lower, sliding 6.5 percent to 70.2 euro cents. Revenue growth from Latin America is poised to slow to 2.7 percent in 2013 from 12 percent last year, according to an estimate by Sanford C. Bernstein & Co.

G4S Plc (GFS), the world’s largest security-guard supplier, fell 2.6 percent to 283 pence after after Britain had to call in the military to beef up the company’s efforts to staff London’s Olympic Games in two week’s time. G4S said it’s is experiencing “some delays” in vetting and accrediting the thousands of extra guards needed.

Aegis Group surged 45 percent to 235.3 pence, the biggest jump since at least January 1991. Dentsu, a Japanese advertising company agreed to buy Aegis in a deal valued at about 3.16 billion pounds ($4.9 billion).

Carrefour, Premier

Carrefour rallied 7 percent to 14.12 euros, gaining the most since Jan. 26. The world’s second-largest retailer said second-quarter revenue fell 0.3 percent to 21.7 billion euros ($26.6 billion). The average of six analysts’ estimates called for 21.6 billion euros.

Premier Oil Plc (PMO) rose 2.1 percent to 366.3 pence after it agreed to buy a 60 percent stake in Rockhopper Exploration Plc (RKH)’s assets in the Falkland Islands. Rockhopper declined 13 percent to 237.5 pence, erasing an earlier gain of as much as 16 percent.

SAP AG (SAP) advanced 2.7 percent to 47.50 euros, erasing earlier losses, after the biggest maker of business-management software reported second-quarter software license sales that topped analysts’ estimates.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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Companies Mentioned

  • INFY
    (Infosys Ltd)
    • $59.05 USD
    • -0.58
    • -0.98%
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