Bloomberg News

European Stocks Drop as Earnings Trail Forecasts

July 31, 2012

European Stocks Decline as Earnings Miss Forecasts

A visitor views share price information on computer monitors inside the Madrid Stock Exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

European stocks declined, even as the Stoxx Europe 600 Index headed for its second successive monthly rally, after companies including BP Plc and UBS AG (UBSN) reported earnings that missed forecasts. U.S. index futures and Asian shares rose.

BP led losses, dropping 4.3 percent, the most in almost nine months. UBS tumbled 4.9 percent. Deutsche Bank AG (DBK) slipped after saying earnings at its investment bank fell 63 percent in the second quarter. Bayer AG (BAYN) advanced after raising its sales and earnings forecasts for the year.

The Stoxx 600 retreated 0.3 percent to 263.14 at 11:44 a.m. in London. The gauge has still rallied 4.8 percent in July as policy makers resolved to preserve the euro and support economic growth. The measure has rebounded 13 percent from this year’s low on June 4. Futures on the Standard & Poor’s 500 Index gained 0.2 percent, while the MSCI Asia Pacific Index added 1.1 percent.

“No one expected earnings to be very good,” said Pierre Mouton, a fund manager who helps oversee $6.5 billion at Notz Stucki & Cie. in Geneva. “After a couple of spectacular trading sessions, it is an opportunity to lock in gains.”

Federal Reserve Chairman Ben S. Bernanke may forgo announcing a third round of large-scale asset purchases this week, and may wait until September to unveil plans to buy $600 billion in housing and government debt, according to median estimates of economists in a Bloomberg News survey.

Stimulus Timing

Eighty-eight percent of economists say the Federal Open Market Committee will refrain from starting new purchases at a two-day meeting beginning today in Washington. Forty-eight percent say the FOMC will announce the buying at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists.

“There is a lot of hope that both the Fed and the European Central Bank will take actions to support their economies,” said Mouton. “There is a risk that the market will be disappointed if the Fed’s announcement doesn’t meet investors’ expectations.”

American personal spending rose 0.1 percent in June following no change in May, even as incomes climbed 0.4 percent, the most in three months, median projections from a Bloomberg survey showed before reports at 8:30 a.m. in Washington.

The Conference Board’s index of consumer confidence fell in July for a fifth consecutive month, the longest period of declines since the first half of 2008, economists forecast before another report today.

Euro-Area Jobs

The jobless rate in the euro area has reached the highest on record as the festering debt crisis and deepening economic slump prompted companies to cut jobs. Unemployment in the 17- nation economy held at 11.2 percent in June, the European Union’s statistics office said.

BP (BP/) lost 4.3 percent to 425.55 pence, the most since Nov. 1. Europe’s second-biggest oil company reported a loss in the second quarter as the company wrote down the value of U.S. assets and production dropped.

BP reported a net loss of $1.4 billion compared with a profit of $5.7 billion a year earlier, the London-based company said today in a statement. Excluding one-time items and changes in inventories, profit missed analyst estimates.

Bank Shares

A gauge of European lenders was the second-worst performer on the Stoxx 600 today, dropping 1 percent.

UBS retreated 4.9 percent to 10.39 Swiss francs, the biggest decline since April 10. Switzerland’s biggest bank reported second-quarter profit that fell 58 percent, missing analysts’ projections, as its investment bank lost money on the Facebook Inc. share sale.

Net income declined to 425 million francs ($434 million) from 1.02 billion francs a year earlier. That fell short of the 1.09 billion-franc mean estimate in a Bloomberg survey.

Deutsche Bank fell 1 percent to 24.61 euros. Germany’s biggest lender said earnings at its investment bank fell 63 percent in the second quarter.

Pretax profit at the corporate banking and securities unit slid to 357 million euros ($439 million). That trailed the 835 million-euro average forecast by eight analysts surveyed by Bloomberg.

Anheuser-Busch InBev NV (ABI) tumbled 4.4 percent to 63.35 euros. The world’s biggest brewer reported an unexpected drop in second-quarter beer-sales volume as demand fell in the U.S. and Europe.

SGL Carbon SE (SGL), a producer of carbon and graphite materials, slipped 4.6 percent to 32.98 euros. The company cut its forecast for this year’s earnings before interest and taxes to about 160 million euros from 165.5 million euros, citing lack of demand improvement in the carbon fibers and composites business.

Bayer, Infineon

Bayer rose 2.6 percent to 62.71 euros. The company said sales will increase about 4 percent to 5 percent this year to 39 billion euros to 40 billion euros, excluding currency and portfolio changes. The company previously forecast a sales increase of about 3 percent.

Core earnings per share will rise about 10 percent and earnings before interest, taxes, depreciation and amortization before special items will increase by a high single-digit percentage, Bayer said. The company previously predicted a slight improvement in both.

Infineon Technologies AG (IFX) jumped 8.3 percent to 6.02 euros. Europe’s second-largest semiconductor maker said it will cut spending “sharply” to cope with slowing chip demand that’s pulling down its sales and profitability. The company said it will reduce investment in the fiscal year starting Oct. 1 and has frozen recruitment.

Teleperformance SA, the French operator of call centers, surged 8.9 percent to 20.12 euros, for the best stock performance in the Stoxx 600. The company reported a 36 percent jump in first-half profit and reiterated its targets for revenue and earnings growth.

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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