European Stocks Retreat as BP Plunges; U.S. Futures Drop
Stock Chart for BP PLC (BP/)
Most European stocks declined as the rate of manufacturing expansion in China and Europe slowed and BP Plc failed to plug a leaking oil well in the Gulf of Mexico.
BP, Europe’s second-biggest oil company, slumped the most in 18 years. Boliden AB led mining companies lower as base metals dropped. Prudential Plc jumped 6.3 percent on speculation its takeover of American International Group Inc.’s main Asian unit won’t proceed. Ryanair Holdings Plc rose 4.4 percent as Europe’s largest discount carrier reported an annual profit and said it will pay its first dividend.
The Stoxx Europe 600 Index increased 0.2 percent to 245.34 even as four shares fell for every three that advanced. The gauge slumped 5.8 percent in May, the biggest monthly drop since February 2009, amid concern that European nations will have difficulty taming their budget deficits without harming the economic recovery.
“Chinese manufacturing data is another sign showing the global economy is cooling down,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments, which oversees about $221 billion globally. “The cyclical tailwind is fading and the market is a bit under pressure. Expectations for the macroeconomic environment and earnings are still ambitious.”
National benchmark indexes rose in 10 of the 18 western European markets. France’s CAC slipped 0.1 percent while Germany’s DAX gained 0.3 percent. The U.K.’s FTSE 100, which was closed for a holiday yesterday, decreased 0.5 percent.
China’s Purchasing Managers’ Index slid to 53.9 in May from 55.7 the month before, the Federation of Logistics and Purchasing said today. That was less than the median 54.5 estimate in a Bloomberg News survey of 18 economists. Readings above 50 indicate expansion.
A gauge of manufacturing in the euro region declined to 55.8 in May from 57.6 the previous month, Markit Economics said. That’s below an initial estimate of 55.9 released on May 21.
In the U.S., construction spending rose in April by the most since 2000 and manufacturing expanded in May for a 10th straight month, bolstering optimism the world’s largest economy is weathering the European debt crisis.
“We have to remain vigilant and take advantage of opportunities in this market,” said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris, which oversees about $150 million. “This morning the statistics from China and Europe were disappointing, and this afternoon reports showed the U.S. is recovering. We have to weigh the pros and cons.”
BP, the third-largest stock in the Stoxx 600, slumped 13 percent to 430 pence, the biggest drop since June 1992. The company said on May 29 a “top kill” attempt to plug the worst oil spill in U.S. history using heavy fluids and debris had failed. That rules out stopping the flow of crude from the well until relief drilling is completed in August.
Credit-default swaps on BP rose 36 basis points to a record 136, according to CMA DataVision. BP may break up or become a takeover target, London-based investment bank Arbuthnot Securities Ltd. said.
“There has been much speculation regarding both Tony Hayward’s future at the company and the possibility of the dividend being cut,” Arbuthnot analyst Dougie Youngson said in a note today. “The situation is beyond both of these points and the key question is now ‘can BP survive?’”
Saipem SpA slid 3.2 percent to 24.73 euros as Europe’s biggest provider of oilfield services by market value was downgraded to “neutral” from “add” at Evolution Securities Ltd. CGGVeritas, the world’s largest seismic surveyor of oilfields, sank 3.6 percent to 17.43 euros, the lowest close since February.
Boliden, a Swedish copper and zinc miner, slid 1.4 percent to 93.20 kronor as base metals declined on concern about the outlook for demand in China. BHP Billiton Ltd., the world’s biggest mining company, fell 2 percent to 1,874.5 pence.
Rio Tinto Group retreated 1.2 percent to 3,152 pence. The third-largest mine operator said it’s paying its “fair share” of Australian taxes after Prime Minister Kevin Rudd vowed to push ahead with plans to impose a 40 percent levy on profits.
Prudential surged 6.3 percent to 575.5 pence, the highest close since April. AIG rejected a request from the U.K.’s largest insurer to cut the price of its $35.5 billion offer for AIA Group Ltd., fueling speculation the takeover won’t go ahead.
Prudential was seeking to lower the price to $30.4 billion, the London-based company said today. New York-based AIG said it “will adhere to the original terms of its previously announced agreement with Prudential.”
“It’s a dead deal,” said Paul Mumford, who helps oversee about $600 million including Prudential shares at Cavendish Asset Management Ltd. in London. “The Pru will have to pull back gracefully now. It was a very costly mistake.”
Ryanair gained 4.4 percent to 3.53 euros after posting net income in the 12 months through March 31 of 305 million euros ($375 million), compared with a net loss of 169 million euros a year earlier. The carrier said it plans to pay a special dividend of 500 million euros in October, its first payment to shareholders since the company sold stock in 1997.
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