Bloomberg News

European Stocks Drop a Third Day in Longest Slide in Eight Weeks

August 21, 2013

European stocks posted their longest losing streak in eight weeks amid speculation that the minutes of the Federal Reserve’s July meeting will give further details of when the central bank will slow its monthly bond purchases.

Heineken NV (HEIA) dropped 4 percent after the world’s third-largest brewer said that profit before some items will not grow in 2013. HSBC Holdings Plc and BHP Billiton Ltd. slid, contributing the most to losses by gauges of banks and commodity producers. Vestas Wind Systems A/S jumped the most in four weeks as the unprofitable Danish wind-turbine maker named a new chief executive officer.

The Stoxx Europe 600 Index slipped 0.5 percent to 300.61 at the close of trading, extending its lowest level since July 31. The gauge has fallen 3.2 percent from this year’s high on May 22 as speculation mounted that the Fed will start to slow the pace of its quantitative-easing program next month.

“We think the Fed will start to announce tapering, but we also expect them to say they are going to be prudent with the pace of tapering,” said Franz Wenzel, who helps oversee $759 billion as a strategist at AXA Investment Managers in Paris. “Housing has been a pillar of this recovery and they do not want to derail that. The Fed will continue to alert investors that they will not let yields go crazy.”

The volume of shares changing hands in companies listed on the Stoxx 600 was 23 percent lower than the average of the past 100 days, according to data compiled by Bloomberg.

European Markets

National benchmark indexes declined in 14 of the 18 western-European markets today. Germany’s DAX dropped 0.2 percent, while the U.K.’s FTSE 100 fell 1 percent. France’s CAC 40 slipped 0.3 percent.

Investors will scrutinize the minutes of the Federal Open Market Committee’s July 30-31 meeting for signs of when the Fed will begin to reduce the $85 billion pace of monthly bond purchases. The U.S. central bank will start to scale back bond buying next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13. The median estimate called for purchases to drop to $75 billion a month. The Fed publishes the minutes after the close of European trading today.

The Fed has said that the U.S. economy must improve in line with its forecasts for tapering to take place. A report from the National Association of Realtors showed that existing house sales rose to an annualized 5.39 million in July, the most since November 2009. That exceeded the median economist estimate in a Bloomberg survey of 5.15 million.

Heineken Slides

Heineken dropped 4 percent to 53.29 euros. The Amsterdam-based company reported adjusted earnings before interest and taxes of 1.33 billion euros ($1.8 billion) for the first half, missing the average analyst estimate of 1.34 billion euros. The brewer of the eponymous lager also said that the poor weather in Europe in the spring will affect its full-year earnings.

“The second quarter is clearly below our expectations for well-documented reasons, and that will have an impact on total outlook for the year,” CEO Jean-Francois van Boxmeer said on a call with reporters.

HSBC, Europe’s largest lender, fell 2.3 percent to 682 pence as bank stocks contributed the most to the Stoxx 600’s retreat. BHP Billiton lost 2.6 percent to 1,873 pence.

Glanbia Plc retreated 3.1 percent to 10.04 euros, its biggest decline in eight weeks. The Irish dairy producer repeated its forecast that earnings per share will grow by 8 percent to 10 percent in 2013 because the earnings margin of its Dairy Ireland business dropped in the first half. The company said in a statement that the subsidiary had a difficult six months in consumer products.

Vestas, Veolia

Vestas rallied 5.4 percent to 109 kroner after naming Anders Runevad as CEO. Runevad will succeed Ditlev Engel on Sept. 1 following two successive years of losses. The company also increased its forecast for free cash flow in 2013 to 200 million euros. It had projected positive cash flow this year.

Veolia Environnement SA jumped 8.3 percent to 11.46 euros, its highest price in 16 months. Morgan Stanley added Europe’s biggest water company to its best-ideas list.

“Veolia is the most attractive turnaround story in the sector, moving towards becoming a smaller and leaner company, and still with leadership positions in promising water and waste businesses globally,” analyst Emmanuel Turpin wrote.

Kabel Deutschland Holding AG gained 1.6 percent to 85.89 euros. Germany’s Cartel Office has rejected the need for a competition analysis of Vodafone Group Plc’s acquisition of the cable provider, Frankfurter Allgemeine Zeitung reported, citing the agency’s president, Andreas Mundt.

“We’ve come to the conclusion that the conditions for a referral request aren’t met and will give it up,” he said.

Royal KPN NV increased 1.6 percent to 2.27 euros. America Movil SAB (AMXL) said it has obtained the funding to finance its 7.2 billion-euro bid for KPN. The Dutch phone company said investors can vote on the sale of its German business E-Plus to Telefonica SA at a shareholder meeting on Oct. 2.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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


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