Bloomberg News

European Stocks Decline Before U.S. Manufacturing Report

September 04, 2012

European stocks retreated, paring yesterday’s biggest rally in a month, as investors awaited a report that may show U.S. manufacturing teetered between expansion and contraction in August.

Vodafone Group Plc (VOD) fell 2.4 percent after Sanford C. Bernstein & Co. downgraded the world’s second-largest mobile- phone operator. Royal Ahold NV rose 3.9 percent after saying it may sell its 60 percent stake in Scandinavian retailer ICA, possibly through an initial public offering.

The Stoxx Europe 600 Index slipped 0.6 percent to 266.77 at 2:35 p.m. in London. The equity benchmark has still surged 14 percent from its lowest level this year on June 4 amid speculation that central banks will do more to support growth.

“Investors won’t be willing to do much before the European Central Bank’s meeting on Thursday,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, where he helps oversee $220 billion. The ECB’s president “should reveal details of what he plans to do. There’s a limit to how many times investors are willing to accept no news.”

European (SXXP) stocks advanced the most in a month yesterday as an unexpected drop in Chinese manufacturing increased speculation that the government will announce further stimulus.

U.S. Manufacturing

A report at 10 a.m. New York time today will show that manufacturing in the U.S. stagnated last month, according to economists surveyed by Bloomberg.

The Institute for Supply Management’s factory index was little changed at 50 in August compared with 49.8 in July, according to the median estimate of 70 economists surveyed by Bloomberg. A reading of 50 is the dividing line between contraction and expansion. Spending on construction projects probably rose in July, another release may show.

National benchmark indexes decreased in 12 of the 18 western-European markets. The U.K.’s FTSE 100 Index fell 0.9 percent. France’s CAC 40 retreated 0.7 percent and Germany’s DAX slid 0.5 percent.

Austria’s government bonds stayed higher as the nation sold 1.2 billion euros ($1.5 billion) of securities, in the first of a series of debt sales by euro-area countries this week. Spain, France and Germany also return to the market. The auctions take place before the ECB’s meeting in Frankfurt, where ECB President Mario Draghi may reveal details of a new bond-buying program.

The leaders of the single currency’s biggest economies hold further meetings this week as they brace for their central banker’s plan to defend the euro from bond-market turmoil. Draghi told the European Parliament yesterday he would be comfortable buying three-year government debt to bring down borrowing costs for nations in financial distress.

Bilateral Meetings

European Union President Herman Van Rompuy travels to Berlin for talks with German Chancellor Angela Merkel today, while Italian Prime Minister Mario Monti welcomes French President Francois Hollande to Rome.

Vodafone slid 2.4 percent to 178.9 pence for the biggest contribution to the Stoxx 600’s retreat. Bernstein lowered the telecommunications company to market perform from outperform, meaning that investors should not buy more of the shares.

The brokerage said recent regulatory changes may make Vodafone struggle to meet its organic service revenue growth and margin targets in 2012 and 2013.

Royal Bank of Scotland Group Plc (RBS) declined 1.7 percent to 222.6 pence as a parliamentary report revealed that the U.K.’s Financial Services Authority will investigate the computer failures that left some of its 17 million customers unable to access their accounts.

RBS Review

Parliament published the correspondence between FSA Chairman Adair Turner, RBS Chief Executive Officer Stephen Hester and Treasury Committee Chairman Andrew Tyrie.

Volkswagen AG (VOW) dropped 2.7 percent to 133.80 euros. Europe’s biggest carmaker led a decline in auto companies after a report showed that German car registrations declined 5 percent in August. Bayerische Motoren Werke AG (BMW), the largest maker of luxury cars, slid 2.8 percent to 55.54 euros, while Porsche SE slipped 2 percent to 39.55 euros.

Nokia Oyj (NOK1V) declined 2.4 percent to 2.31 euros as the world’s second-biggest maker of mobile phones said it will start a free music service in the U.S. that will work exclusively on its Lumia handsets.

Ahold, Vestas

Ahold climbed 3.9 percent to 10.24 euros, its biggest rally in more than two years, after the Dutch retailer said it will take 6 to 12 months to review options for its stake in ICA. Ahold will probably return at least part of the proceeds from a sale to shareholders in the form of a buyback or special dividend, analysts at SNS Securities NV wrote in a note. They value the stake at 2.1 billion euros to 2.4 billion euros.

Vestas Wind Systems A/S (VWS) jumped 11 percent to 49.19 kroner, its highest price in four months, after SEB AB raised the shares to buy from hold.

DS Smith Plc (SMDS) rose 3.8 percent to 168.2 pence after the British packaging group said that volumes grew faster than gross domestic product in France, Italy and eastern Europe.

Bankia advanced 2.3 percent to 1.40 euros as an economy ministry official said that the Spanish state’s rescue fund, FROB, will recapitalize the nationalized lender with Treasury debt rather than cash. The official asked not to be named in line with government policy.

The volume of shares changing hands on the Stoxx 600 was 13 percent lower than its average of the last 30 days, according to data compiled by Bloomberg.

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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