European stocks fell for a second day, paring their biggest monthly advance since July, as companies from AstraZeneca Plc to Banco Santander SA (SAN) slid after reporting earnings.
AstraZeneca lost 3.2 percent after the drugmaker forecast that profit and sales will slide this year. Santander and Royal Dutch Shell Group Plc both declined more than 2.5 percent as fourth-quarter earnings missed analysts’ estimates.
The Stoxx Europe 600 Index (SXXP) retreated 0.5 percent to 287.22 at the close, as more than two stocks fell for every one that rose. The equity benchmark has still advanced 2.7 percent in January, its eighth month of gains and its longest winning streak since 1997.
“Over the last six months, we’ve had a big re-rating of stocks, but we haven’t had the earnings power coming through,” Toby Nangle, head of multi-asset allocation at Threadneedle Asset Management told Francine Lacqua on Bloomberg Television. “Earnings are going to be critical. We need to get delivery on what we’ve already paid for.”
The valuation for the Stoxx 600 has climbed to 12.2 times estimated earnings from a price-earnings ratio of 10.6 at the end of June. Some 19 companies on the Stoxx 600 report earnings today, according to data compiled by Bloomberg. In western Europe, 59 percent of companies reporting earnings since Jan. 8 have beaten analysts’ estimates. About 56 percent have exceeded projections for revenue.
National benchmark indexes retreated in 15 of the 18 western-European markets today. France’s CAC 40 dropped 0.9 percent and the U.K.’s FTSE 100 slid 0.7 percent, while Germany’s DAX lost 0.5 percent.
“What’s interesting in this environment, with growth quite challenged, is the stock dispersion has been much greater,” said London-based Nangle. “So you are seeing good earnings being much better and bad earnings being really punished by the market -- that’s great for stock pickers.”
AstraZeneca (AZN) slid 3.2 percent to 3,053 pence, its biggest selloff in nine months, after forecasting falling profit because of increased competition from generic medicines.
Sales will decline by a “mid- to high-single digit percentage” at constant exchange rates in 2013, compared with the average analyst projection of a 3 percent slide. The company also said earnings fell for a fourth straight quarter.
Santander declined 3.5 percent to 6.18 euros as Spain’s largest lender set aside money for further loan losses in its home market. The bank reported fourth-quarter profit of 401 million euros ($545 million), missing the 801.6 million-euro average estimate of 11 analysts surveyed by Bloomberg.
Shell fell 2.8 percent to 2,241 pence after Europe’s biggest oil company reported fourth-quarter profit, excluding one-off items and inventory changes, of $5.6 billion. That missed the $6.2 billion average analyst estimate in a Bloomberg survey. Net income advanced 3 percent to $6.7 billion.
Anheuser-Busch InBev NV tumbled 7.8 percent to 63.90 euros, its biggest drop since January 2009. The U.S. Justice Department sued to prevent the company from purchasing the half of Grupo Modelo SAB that it doesn’t already own for $20.1 billion. The regulator said the deal would hurt competition in the U.S. beer market. AB InBev said it no longer expects to complete the deal in the first quarter of this year.
TeliaSonera AB (TLSN) slid 1.7 percent to 45.89 kronor as Sweden’s largest phone company said that fourth-quarter earnings before interest, taxes, depreciation, amortization and one-off items declined 3.2 percent to 8.97 billion kronor ($1.4 billion).
Lonmin Plc posted the biggest gain on the Stoxx 600, surging 14 percent to 360 pence. The mining company reported a 17 percent increase in platinum sales in the first quarter, saying it has successfully restarted and increased production.
Ericsson AB rallied 7.6 percent to 74 kronor. The world’s largest maker of wireless networks reported a 5 percent increase in revenue for the fourth quarter to 66.9 billion kronor, exceeding the average analyst estimate of 65.8 billion kronor. The company also reported a net loss of 6.46 billion kronor after writing off its wireless-chip alliance with STMicroelectronics (STM) NV.
STMicroelectronics gained 4.1 percent to 6.39 euros, rebounding from an earlier loss of as much as 3.6 percent, as the chipmaker finalizes plans to pull out of ST-Ericsson by the third quarter. Ericsson has said that the two companies may shut down their joint venture.
Infineon Technologies AG climbed 3.9 percent to 6.65 euros after Europe’s second-biggest chipmaker forecast that earnings will improve in the current quarter as demand from the car industry increases. Sales will probably climb by a “mid-single- digit” percentage, the company said.
The volume of shares changing hands on the Stoxx 600 was 24 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.
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