Bloomberg News

European Stocks Retreat as Glencore, UniCredit Drop; Kentz Jumps

August 19, 2013

European stocks fell, following three weeks of gains for the Stoxx Europe 600 Index, as this week’s release of minutes from the Federal Reserve’s last meeting fueled speculation policy makers will trim bond buying.

Glencore Xstrata Plc dropped 2.1 percent, following mining companies lower. Holcim (HOLN) Ltd. sank the most in 21 months after UBS AG downgraded its rating on the world’s biggest cement maker. Spanish and Italian banks led losses in European lenders as UniCredit SpA and Banco Santander SA slid more than 2.5 percent. Kentz Corp. rallied 24 percent as the Irish oilfield-services provider rejected two takeover approaches.

The Stoxx 600 decreased 0.5 percent to 304.77 at the close of trading as the Federal Open Market Committee prepared to publish minutes of its July meeting on Wednesday. The equity benchmark has fallen 1.9 percent from its peak this year on May 22 as Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank could pare stimulus measures if the economy improves in line with forecasts.

“The FOMC minutes is this week’s large focus, and the uncertainty surrounding the upcoming Fed tapering is causing stocks to inch lower,” said Mark Andersen, who helps oversee $1.7 trillion as head of asset allocation at UBS in Zurich. “The main question we are debating at the moment is whether the Fed taper is really in the price of equities. It’s fair to say that market participants are a bit more nervous about the prospect of Fed easing.”

VStoxx Gains

The volume of shares changing hands in Stoxx 600 companies was 13 percent less than the average of the last 100 days, according to data compiled by Bloomberg. The VStoxx Index, which measures the cost of options hedging against moves in the Euro Stoxx 50 Index, surged 6.6 percent for the biggest increase in almost two months.

Investors will scrutinize minutes of the FOMC’s July 30-31 meeting for indications of when the Fed will begin to reduce the $85 billion pace of monthly bond purchases. The minutes may also describe the risks from inflation staying below the central bank’s 2 percent goal. The FOMC holds its next two-day meeting on Sept. 17-18.

Treasuries fell, pushing the yield on the 10-year securities up as much as 5 basis points to 2.87 percent, the highest since July 2011.

Central bankers and policy makers meet in Jackson Hole, Wyoming, from Aug. 22 to Aug. 24 to discuss the global economy and monetary policy.

Glencore lost 2.1 percent to 301.95 pence after Reuters reported the mining company created three months ago may write down as much as $7 billion of inherited Xstrata assets when it reports its first-half earnings tomorrow.

Mining Companies

A gauge of mining shares posted the second-worst performance of the 19 industry groups in the Stoxx 600, as the price of copper fell as much as 1.5 percent in London. Rio Tinto Group and Anglo American Plc dropped 1.6 percent to 3,055 pence and 3.6 percent to 1,492.5 pence, respectively.

Holcim sank 4.4 percent to 67.75 Swiss francs, the most since November 2011. UBS cut its recommendation on the stock to neutral, the equivalent of hold, from buy. The brokerage said currency fluctuations will reduce earnings before interest, taxes, depreciation and amortization by 190 million francs ($205 million) in 2014.

A gauge of lenders contributed the most to the Stoxx 600’s decline. Santander, Spain’s largest bank, retreated 2.9 percent to 5.65 euros as the spread on 10-year Spanish bonds over German securities widened four basis points to 252 basis points. Bankinter SA slid 5.2 percent to 3.65 euros.

UniCredit Sinks

UniCredit fell 5.2 percent to 4.53 euros and Banco Popolare SC lost 4.5 percent to 1.12 euros. The spread on benchmark 10-year Italian debt over bunds with the same maturity widened eight basis points to 238 basis points.

Kentz jumped 24 percent to 591 pence, the biggest rally since its initial public offering in February 2008, after rejecting potential takeover approaches from companies including Amec Plc and M&W Group GmbH. Amec said in a statement that Kentz’s board of directors turned down its offer of 565 pence to 580 pence a share, saying it undervalued the company.

Kentz also rejected M&W’s possible offer, which it said was lower than Amec’s.

Atlas Copco AB (ATCOA) advanced 1.4 percent to 180 kronor. The world’s largest maker of air compressors agreed to buy Edwards Group Ltd. (EVAC:US) for $1.2 billion in cash to expand in vacuum pumps. Shareholders of the British company will receive as much as $10.50 a share depending on this year’s financial results, Stockholm-based Atlas Copco said in a statement.

Balfour Beatty Plc (BBY) added 1.6 percent to 249.7 pence after Deutsche Bank AG raised its rating on Britain’s largest construction company to buy from hold. The brokerage said that first-half results may have marked a trough in earnings.

National benchmark indexes retreated in 15 of the 18 western European markets today. France’s CAC 40 slipped 1 percent and Germany’s DAX fell 0.3 percent. The U.K.’s FTSE 100 declined 0.5 percent.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

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


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