European stocks fell from the highest level in 14 months as investors awaited a Federal Reserve decision on further stimulus measures.
European Aeronautic, Defence & Space Co. (EAD) and BAE (BA/) Systems Plc slid more than 7 percent as Barclays Plc recommended investors trim their holdings in the companies in the short term, as they plan a merger. Zodiac Aerospace rose 2.1 percent after Societe Generale SA upgraded its rating on the stock.
The Stoxx Europe 600 Index slipped 0.2 percent to 272.42 at the close of trading, paring losses of as much as 0.6 percent. The gauge rose to its highest level since July 2011 yesterday after Germany’s top constitutional court cleared the way for ratification of the euro area’s permanent bailout fund.
“The rise in the market over the last few weeks has priced in the expectation of more central bank action, which may prove to be premature,” said Jeremy Batstone-Carr, head of research at Charles Stanley Group Plc in London. “A little bit of investor weariness is creeping in ahead of the Fed’s meeting.”
The Fed may today announce another round of bond purchases, according to almost two-thirds of economists in a Bloomberg survey. The previous two series of quantitative easing totaling $2.3 trillion have failed to revive the labor market, which Fed Chairman Ben S. Bernanke said last month is a “grave concern.”
EADS slid 10 percent to 25.15 euros. The company said yesterday it has entered talks for a merger with BAE to build an equal to Boeing Co. (BA:US) that would balance civil and defense operations. Deutsche Bank AG downgraded the stock to hold from buy.
BAE lost 7.3 percent to 337.1 pence. Europe’s biggest arms maker was cut to hold from buy at Oriel Securities Ltd.
Barclays advised investors to trim their exposure to EADS and take profits in BAE because of the potential for near-term challenges in the deal closure process. Barclays kept its overweight recommendation, similar to a buy, on both companies, reflecting long-term prospects.
National benchmark indexes fell in 11 of the 18 western- European (SXXP) markets. The U.K.’s FTSE 100 advanced 0.7 percent, while Germany’s DAX lost 0.5 percent. France’s CAC 40 slid 1.2 percent.
The volume of shares changing hands on the Stoxx 600 was 8.2 percent higher than the average of the last 30 days, data compiled by Bloomberg show.
Next Plc (NXT) slumped 7.2 percent to 3,320 pence after the U.K.’s second-largest clothing retailer said sales in August and early September were “disappointing,” paring growth for the year to date.
Imagination Technologies Group Plc. (IMG) tumbled 7.2 percent to 566 pence after saying first-quarter royalty revenue growth was in line with expectations, while royalty rates decreased slightly because of higher volumes in low-end smartphones.
Numis Securities downgraded its recommendation on the U.K. chip designer for mobile applications to hold from buy, with a price forecast of 590 pence per share.
Debenhams Plc (DEB), the U.K. department-store operator, slid 1.8 percent to 98.25 pence. Home Retail Group Plc (HOME), an operator of home and general-merchandise retail stores, retreated 4.6 percent to 94.85 pence. A gauge of retailers was among the worst performers of the 19 industry groups on the Stoxx Europe 600 Index.
Vinci SA (DG), Europe’s biggest builder, fell 3.6 percent to 35.46 euros after Bank of America Corp. cut its recommendation on the shares to neutral from buy. A gauge of construction companies made the biggest contribution to the Stoxx 600’s decline today.
Vestas Wind Systems A/S (VWS), the world’s largest wind turbine maker, plunged 13 percent to 34.55 kroner. The company is considering selling shares to existing investors if talks on a strategic cooperation with Mitsubishi Heavy Industries Ltd. fail, two people familiar with the matter said.
Zodiac Aerospace (ZC), which manufactures and sells aeronautical equipment including weapons systems, added 2.1 percent to 79.60 euros after Societe Generale upgraded its recommendation on the shares to hold from sell.
WPP Plc (WPP), the world’s biggest advertising agency, rose 1.3 percent to 848 pence after the shares were raised to hold from underperform at Jefferies Group Inc.
Lonza Group AG (LONN) gained 4.9 percent to 49.32 Swiss francs. The Swiss specialty-chemical maker sold 305 million francs ($324 million) of bonds to refinance a bridge loan used for its acquisition of Arch Chemicals Inc. in October 2011.
The refinancing measures remove much of Lonza’s near-term financing overhang, and may boost pre-tax earnings by 3 percent, according to JPMorgan Chase & Co.
Julius Baer Group Ltd. (BAER) advanced 2.9 percent to 33.49 francs. Chief Executive Officer Boris Collardi said he was “confident on the cost-cutting side” at the Asian wealth- management business it bought from Bank of America Corp., according to a Financial Times report.
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