Bloomberg News

European Stocks Decline as German Investor-Sentiment Index Falls

July 16, 2013

European Stocks Drop Before Data as Telecom Italia Shares Plunge

A financial trader reacts as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks fell from their highest level in almost six weeks as German investor confidence unexpectedly dropped this month.

Telecom Italia SpA plunged to its lowest price since July 1997 after Italy’s biggest phone company paused a plan to spin off its fixed-line business. Invensys Plc fell the most in three weeks as optimism for a bid from General Electric Co. waned. Rio Tinto Group led commodity producers higher after posting a 7 percent increase in second-quarter iron-ore production and raising its forecast for full-year copper output.

The Stoxx Europe 600 Index dropped 0.7 percent to 295.31. The gauge rallied 5.6 percent in the past three weeks on optimism central banks around the world will continue to support economic recovery.

“I think it’s increasing political risks in the euro zone in the coming weeks that is on investors’ radar,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Pension A/S in Copenhagen, wrote in a message. “Stocks started falling well in advance of the ZEW, but of course, the ZEW disappointment doesn’t help either.”

German investor confidence unexpectedly dropped in July, data showed today. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations fell to 36.3 this month from 38.5 in June. Economists in a Bloomberg survey had forecast a gain to 40.

U.S. Industry

U.S. industrial production rose in June by the most in four months, another release showed. Output at factories, mines and utilities climbed 0.3 percent, the biggest advance since February, after being little changed in May, a Federal Reserve report showed in Washington. The gain matched the median forecast of 86 economists surveyed by Bloomberg.

National benchmark indexes fell in 16 of the 18 western European markets. Germany’s DAX lost 0.4 percent. The U.K.’s FTSE 100 slipped 0.5 percent. France’s CAC 40 dropped 0.7 percent.

Telecom Italia retreated 3.4 percent to 48.64 euro cents after saying a regulatory decision to cut access fees to the carrier’s network affected the feasibility of a network separation. This is the second setback for Chief Executive Officer Franco Bernabe’s plans to revive the company as a proposed merger with Hutchison Whampoa Ltd.’s 3 Italia unit ended amid price disagreement and antitrust concern.

Invensys Plc fell 1.5 percent to 502 pence, its biggest decline since June 24. Makor Capital Ltd. said it doesn’t expect a competing bid for the company, following Schneider Electric SA’s 3.3 billion-pound ($5 billion) offer on July 11. Makor commented after the Sunday Times reported that General Electric Co. may bid for Invensys.

Swedbank Earnings

Swedbank AB (SWEDA) slid 3.9 percent to 154 kronor after saying second-quarter net income fell to 1.59 billion kronor ($239 million), missing analysts’ projections for 1.87 billion kronor.

SES SA, the world’s largest publicly traded satellite operator, dropped 4.4 percent to 21.60 euros. Morgan Stanley downgraded the stock to underweight, a recommendation similar to sell, from overweight. The brokerage said the proliferation of satellite launches globally increases risk.

Rio Tinto rose 2.7 percent to 2,883 pence, leading a gauge of mining companies to the best performance as a group on the Stoxx 600. The world’s second-largest mining company said second-quarter iron-ore production increased to 51.8 million metric tons in the three months to June 30. That beat the 51.2 million-ton median estimate of seven analysts surveyed by Bloomberg. The company also raised its forecast for full-year copper production.

Aurubis AG, the second-biggest producer of refined copper, advanced 4.8 percent to 42.12 euros. Societe Generale SA started coverage of the stock with a buy rating and a 12-month price estimate of 48 euros.

Lufthansa Rating

Deutsche Lufthansa AG gained 0.8 percent to 15.54 euros, rising for a fourth day. Goldman Sachs Group Inc. raised its recommendation for the shares of Europe’s second-largest airline to neutral from sell.

Banca Monte dei Paschi di Siena SpA rose 1.4 percent to 21.7 euro cents. Fondazione Monte dei Paschi di Siena, which has controlled the Italian bank for 18 years, agreed to remove a cap that limits other owners’ voting rights. The foundation will back the abolition of the 4 percent cap at a shareholders meeting on July 18. The world’s oldest bank is seeking to attract new investors in a 1 billion-euro ($1.3 billion) stock sale to help repay state aid.

SKF AB added 3.1 percent to 171.80 kronor, its highest price since Feb. 21. The world’s biggest maker of bearings posted second-quarter sales and net income that beat analysts’ estimates.

Michelin & Cie. added 2.6 percent to 74.36 euros, its highest price since December 2007. Europe’s largest tiremaker said the region’s tire demand at the manufacturers’ level increased 2 percent in June, while it increased 3 percent in the replacement market.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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


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