Bloomberg News

Europe Stocks Drop on China Concern; Stoxx 600 Erases 2013 Gains

June 24, 2013

European stocks fell for a fifth day, erasing their gains for the year, as Goldman Sachs Group Inc. cut China’s growth forecast amid concern banks in the world’s second-largest economy face a cash crunch.

Erste Group Bank AG tumbled the most in 17 months as it planned a rights offer to repay state aid. Kazakhmys Plc plunged to a four-year low as it backed a bid to take Eurasian Natural Resources Corp. private. Kabel Deutschland Holding AG rose 1.7 percent after Vodafone Group Plc offered to buy the German cable company for 7.7 billion euros ($10.1 billion).

The Stoxx Europe 600 Index declined 1.7 percent to 275.66 at the close in London. The equity benchmark has entered a so-called correction, having slumped 11 percent since May 22, when Federal Reserve Chairman Ben S. Bernanke commented on the possibility of paring bond purchases.

“What we’re seeing is a shift in the policy agenda of China which will take place in the next six to nine months,” James Bevan, who oversees about 4.2 billion pounds ($6.5 billion) as chief investment officer at CCLA Investment Management Ltd. in London, told Francine Lacqua on Bloomberg Television. “During that period, we will have continued volatility and continued uncertainty. It will be painful as the adjustment goes through.”

The Stoxx 600 is heading for an 8.4 percent drop in June, its biggest monthly loss since August 2011. The VStoxx Index, a measure of expected volatility in euro-area stocks, jumped 5.2 percent to the highest level since February.

China Outlook

China’s stocks plunged the most since August 2009 -- and the CSI 300 Index (SHSZ300) extended its decline from a February high to more than 20 percent -- after the country’s central bank signaled it will maintain efforts to curb speculative lending.

Separately, Goldman Sachs cut its estimate for China’s economic growth this year to 7.4 percent from an earlier prediction of 7.8 percent, citing weaker economic indicators and tighter financial conditions.

While money-market rates in the country fell for a second day from a record, the overnight repurchase rate of 6.47 percent was still more than double this year’s average of 3.09 percent, according to a fixing compiled by the National Interbank Funding Center.

In Germany, data showed that business confidence increased in June in line with economists’ estimates. The Ifo institute’s business climate index, based on a survey of 7,000 executives, rose to 105.9 this month from 105.7 in May.

Benchmark Indexes

National benchmark indexes fell in all of the 17 western European markets trading today, except Iceland. The U.K.’s FTSE 100 retreated 1.4 percent, while France’s CAC 40 declined 1.7 percent. Germany’s DAX dropped 1.2 percent. Greece was closed for Whit Monday holiday.

The volume of shares traded on companies listed in the Stoxx 600 was 28 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

Erste tumbled 8.5 percent to 20.09 euros, its biggest drop since January 2012. Austria’s biggest lender plans to increase its share capital by 660 million euros in the third quarter as it redeems participation capital of 1.76 billion euros. Erste also cut its earnings outlook, saying it expects its pre-provision operating profit to decline by 5 percent this year.

ENRC Offer

Kazakhmys, which owns 26 percent of ENRC, plunged 13 percent to 233.7 pence, its lowest price since February 2009. ENRC founders and the Kazakh government made an offer valuing the mining company at 3.04 billion pounds. They offered shareholders $2.65 in cash and 0.23 Kazakhmys shares for each ENRC share held.

A gauge of mining companies in the Stoxx 600 slumped to its lowest level since July 2009. Rio Tinto Group, the second-largest commodity producer, declined 3.4 percent to 2,582 pence and Anglo American Plc fell 4 percent to 1,297.5 pence.

Metro AG lost 5.5 percent to 23.55 euros, the biggest drop since March 4. Citigroup Inc. downgraded the German retailer to sell from neutral, citing weaker growth in Russia and other emerging markets.

Nokia Oyj retreated 4 percent to 2.88 euros, its sharpest decline in a month, and Alcatel-Lucent SA lost 4.8 percent to 1.39 euros, contributing to a decline in an index of technology shares in the Stoxx 600.

Kabel Deutschland advanced 1.7 percent to 85.50 euros. Vodafone, the world’s second-biggest wireless carrier, raised its bid for Kabel Deutschland to 87 euros a share from the initial 80 euros. The German cable company said its board plans to recommend the cash offer to its shareholders.

Fiat SpA rose 3.8 percent to 5.33 euros as people familiar with the matter said the Italian carmaker may triple its dividend earned from Chrysler Group LLC, in which it holds a 58.5 percent controlling stake. Fiat may collect $936 million in 2013, from a previous maximum of $300 million, after the U.S. automaker refinanced its debt with new covenants that eased restrictions on dividend payment.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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