Bloomberg News

European Stocks Slip From 15-Month High; SSAB Tumbles

September 17, 2012

European Stocks Decline From 15-Month High

Visitors pass beneath giant screens displaying share price information inside the Madrid Stock Exchange in Madrid. Photographer: Angel Navarrete/Bloomberg

European stocks declined from a 15- month high as concern of a deepening economic slowdown in China overshadowed optimism resulting from the Federal Reserve’s third round of quantitative easing.

SSAB sank 6.9 percent as the Swedish steelmaker said demand for strip products has been much weaker than expected. Hennes & Mauritz AB slid 1.6 percent after third-quarter sales missed estimates. Vodafone Group Plc (VOD), which has resisted setting aside money for a $2.2 billion tax bill in India, fell 1.3 percent after saying it may make a provision to cover legal risks.

The Stoxx Europe 600 Index (SXXP) slipped 0.3 percent to 275.01 at the close of trading. The equity benchmark has still climbed 12 percent this year, rising to the highest level since June 2011 last week, as European Central Bank policy makers agreed to implement an unlimited bond-buying program and the Fed unveiled a third round of asset purchases.

“With the adrenalin rush of last week’s Fed move now wearing off, markets are looking for the next positive catalyst,” Richard Hunter, head of equities at Hargreaves Lansdown Plc in London, wrote in an e-mail. “With indices having posted decent gains in the year to date, investors may sell into strength to lock in gains.”

National benchmark indexes fell in all of the 18 western European markets, except Belgium. Germany’s DAX slipped 0.1 percent, the U.K.’s FTSE 100 (UKX) declined 0.4 percent, while France’s CAC 40 dropped 0.8 percent.

Fed Action

Fed Chairman Ben S. Bernanke said on Sept. 13 that the U.S. central bank will buy $40 billion of mortgage-backed securities a month, without a limit on the total or duration. The Fed also extended its near-zero interest rate policy until 2015 and said it will stay accommodative “for a considerable time” even after the economy strengthens.

Citigroup Inc. cut its forecast for China’s 2013 growth to 7.6 percent from 8 percent on weakening external demand. Separately, the official Xinhua News Agency said China needs to be more cautious with its monetary policies as quantitative easing in the U.S. will create more pressure to control inflation. Xinhua cited Lu Zhengwei, chief economist at Industrial Bank Co.

Hong Kong will limit the maximum term on all new mortgages to 30 years in an effort to cool home prices, Norman Chan, the de-facto central bank’s chief executive, told reporters on Sept. 14. Mortgage payments for investment properties can’t be more than 40 percent of buyers’ monthly incomes, from the current 50 percent, he said.

Island Dispute

Demonstrators took to the streets in a dozen cities across China yesterday amid anger over disputed islands known as Diaoyu in Chinese and Senkaku in Japanese. Japanese Prime Minister Yoshihiko Noda said he’ll demand China ensures the safety of Japanese citizens.

“Chinese tensions with the Japanese are not helping,” Hargreaves Lansdown’s Hunter said.

A report today showed manufacturing in the New York area contracted more than forecast in September as orders shrank. The Fed Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index.

SSAB (SSABA) tumbled 6.9 percent to 53.05 kronor, the biggest decline since February. The steelmaker said demand for strip products has been much weaker than expected in the third quarter and warned that falling iron ore prices are expected to hurt earnings in the first quarter of next year.

Steelmakers Slip

ThyssenKrupp AG (TKA), Germany’s biggest steelmaker, slid 4.5 percent to 17.65 euros after UBS AG downgraded the stock to sell from neutral. The rally in ThyssenKrupp’s shares following its announcement of plans to sell its Steel Americas unit is premature, according to Carsten Riek, an analyst at UBS.

Salzgitter AG (SZG), the second-largest German steelmaker, dropped 4.7 percent to 33.29 euros.

H&M (HMB) declined 1.6 percent to 243.20 kronor as Europe’s second-largest clothing retailer reported third-quarter sales that missed analysts’ estimates after an August heatwave in some parts of the region hurt business.

Revenue excluding value-added tax rose to 28.8 billion kronor ($4.4 billion) through Aug. 31, the Stockholm-based company said, missing the 29.8 billion-kronor average estimate of 19 analysts surveyed by Bloomberg. Sales at stores open at least a year declined 4 percent in August.

Vodafone Falls

Vodafone, the world’s second-largest mobile-phone operator, slipped 1.3 percent to 173.65 pence after Chief Financial Officer Andy Halford said in an interview the company may make a provision to cover legal risks relating to a $2.2 billion tax bill in India.

Vodafone is consulting on the need for a provision after an amendment by India’s government to its tax law made the company potentially liable for the payment, Halford said. A decision will be made by November, he said.

Vivendi SA (VIV), Europe’s biggest media and telecommunications company, declined 1.9 percent to 15.54 euros after the stock was cut to sell from neutral at UBS.

Celesio AG, Europe’s largest drug wholesaler, slumped 5 percent to 14.06 euros as an analyst at Exane BNP Paribas reduced his price estimate for the stock because cuts in U.K. government reimbursement may lower profits.

Vestas Surges

Vestas Wind Systems A/S (VWS) advanced 8.3 percent to 39.53 kroner for the biggest gain in the Stoxx 600. A tie up of the world’s biggest wind-turbine maker with Mitsubishi Heavy Industries is more likely as Japan shuns nuclear energy, according to SEB Enskilda. The deal may include a technology share or an equity stake, the Nordic investment bank said.

Lonmin Plc (LMI), the third-biggest platinum producer, surged 5.6 percent to 649 pence. Bishop Jo Seoka, who was assisting in talks between the company and its workers, said staff have agreed to lower their pay demands, without giving further details. Lonmin’s Marikana mine has been halted by a strike over pay since Aug. 10, in a dispute which has erupted into violence and claimed at least 45 lives.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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


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