European stocks declined for a third day as investors speculated that economic fundamentals don’t justify current stock valuations and Alcoa Inc. (AA:US) cut its forecast for global aluminum demand.
Anheuser-Busch InBev NV slipped 1.2 percent after a report that the U.S. may block its $20 billion takeover of Grupo Modelo SAB. BAE Systems Plc (BA/) fell after abandoning plans to merge with European Aeronautic, Defence & Space Co. Imagination Technologies Group Plc (IMG) lost 9.4 percent as analysts recommended selling the shares.
The Stoxx Europe 600 Index (SXXP) dropped 0.6 percent to 268.71 at the close of trading, the lowest level since Sept. 28. The benchmark gauge has still surged 15 percent from this year’s low on June 4 as the European Central Bank unveiled an unlimited bond-purchase plan and the Federal Reserve started a third round of quantitative easing.
“We are probably in the upper range in terms of equity indices and it is difficult to see the catalysts for further upside,” said Peter Garnry, an equity strategist at Saxo Bank A/S in Copenhagen. “The recent rally was not based on changes in the underlying economic expectations and as such something has to give.”
The Stoxx 600 is trading at 11.9 times the estimated earnings of its companies, higher than its five-year average of 11.5, data compiled by Bloomberg show. The gauge last month reached a price multiple of 12.3, the highest since 2010.
Alcoa, the largest American aluminum producer, kicked off the U.S. earnings season by cutting its forecast for global consumption of the metal by 1 percentage point on slowing Chinese demand. The company reported third-quarter profit and sales that exceeded estimates.
The International Monetary Fund yesterday cut its global growth forecasts and warned of even slower expansion if European officials don’t address threats to their economies.
The IMF today said European banks may need to sell as much as $4.5 trillion of assets through 2013 if policy makers fail to implement fiscal tightening or set up a single supervisory system in time.
National benchmark indexes fell in all 18 western European markets. The U.K.’s FTSE 100 slipped 0.6 percent, while Germany’s DAX retreated 0.4 percent and France’s CAC 40 declined 0.5 percent.
AB InBev (ABI) dropped 1.2 percent to 67.31 euros after The Capitol Forum reported that the U.S. Department of Justice may want to block the company’s purchase of Mexico’s Modelo, which brews Corona beer. The department may not approve the deal in its current form, the news service that tracks antitrust events said.
BAE fell 1.4 percent to 320.9 pence after the arms company and EADS confirmed they are no longer pursuing a merger. It had become clear that the interests of the “government stakeholders” could not be adequately reconciled, the two companies said. EADS jumped 5.3 percent to 27.48 euros.
Imagination Technologies tumbled 9.4 percent to 455.5 pence for the biggest decline in the Stoxx 600. Credit Suisse Group AG started coverage of the U.K. chip designer with an underperform rating, similar to a sell recommendation.
Elsewhere, Publicis Groupe SA (PUB), the world’s third-largest advertising company, declined 2.6 percent to 43.16 euros after Exane BNP Paribas said third-quarter revenue growth may miss forecasts as the advertisement market worsened since July.
Capita Plc (CPI) fell 1.8 percent to 727 pence. RBC Capital Markets downgraded the supplier of services for the British army to sector perform, a recommendation similar to hold, from outperform, a rating equivalent to buy.
Bankia SA (BKIA) paced advancing shares, climbing 4 percent to 1.02 euros, the first advance in 13 days. Bankia said it sold 126 million euros of written-off car loans to Norway’s Aktiv Kapital. Since July, the bank has sold 926 million euros of soured loans.
Man Group Plc (EMG) rose 3.8 percent to 93.4 pence, the highest price in five months, after the Daily Mail reported BlackRock Inc. may buy the company. The firm may head a group of bidders in a 140 pence-a-share offer, the Daily Mail reported, without saying where it got the information.
Separately, RBC analyst Peter Lenardos said he doesn’t find speculation of a bid for Man Group credible.
“It is possible but remains unlikely,” he wrote. “We do not see the logic of acquiring a company whose funds are underperforming key benchmarks and are experiencing net outflows.”
Royal Bank of Scotland Group Plc advanced 2.1 percent to 262.7 pence after agreeing to sell two buildings in Frankfurt and Berlin to Axa Investment Managers SA in the biggest German commercial real estate transaction this year, according to two people with knowledge of the matter.
The properties are valued at about 790 million euros, according to the people, who asked not to be identified because the information is private.
Lloyds Banking Group Plc (LLOY), the U.K.’s second-biggest government-aided bank, gained 4 percent to 38.48 pence. U.S. investment firms Lone Star Funds and Kennedy-Wilson Holdings Inc. are among remaining bidders for parts of about 2 billion euros ($2.6 billion) of mainly Irish real estate loans Lloyds Banking Group Plc is selling, two people with knowledge of the matter said.
Lloyds decided two years ago to close and run down the Irish unit it acquired two years earlier as part of its 2008 takeover of HBOS Plc.
To contact the reporter on this story: Jonathan Morgan in Frankfurt at firstname.lastname@example.org
To contact the editor responsible for this story: Andrew Rummer at email@example.com