European Stocks Rise to 12-Week High; Air France, LVMH Up
Air France-KLM Group chief executive officer Pierre-Henri Gourgeon. Photographer: Victor Sokolowicz/Bloomberg
An Air France Airbus A380 approaches John F. Kennedy International Airport. Photographer: Daniel Acker/Bloomberg
European stocks slid, halting a six- day rally for the Stoxx Europe 600 Index, as an unexpected decline in orders for U.S. durable goods overshadowed better- than-estimated company earnings.
Yell Group Plc paced retreating shares, slumping 19 percent after the publisher posted a drop in profit. Nexans SA lost 8.5 percent after the world’s biggest maker of cables and wires reported narrowing first-half margins. Invensys Plc led technology-related shares lower after announcing a charge for its rail business.
The Stoxx 600 fell 0.4 percent to 257.21 as of the 4:50 p.m. close in London, reversing an earlier rally of as much as 0.6 percent. The gauge has declined 5.5 percent from this year’s high on April 15 amid concern that austerity measures from indebted European governments will harm the economic recovery.
“There are still a lot of questions on the economy and whether the economy will continue to grow or not,” said London- based Kevin Lilley, who helps oversee about $2 billion at Royal London Asset Management. “The market is coming off a very weak couple of months. We are now starting results seasons proper and the early signs are very encouraging.”
National benchmark indexes fell in 13 of the 18 western European markets. The U.K.’s FTSE 100 retreated 0.9 percent and Germany’s DAX lost 0.5 percent. France’s CAC 40 gained 0.1 percent.
Goods Orders Fall
European stocks extended losses after a U.S. Commerce Department report showed orders for durable goods in the world’s largest economy unexpectedly dropped by 1 percent. Economists forecast orders would climb 1 percent, according to a Bloomberg News survey.
Credit Suisse Group AG cut its forecast for gains in U.S. stocks by the end of this year while advising clients to stay “overweight” on equities as economic growth and earnings support the market.
“Even if we assume a slight further weakening of the economy, equities are looking cheap,” Andrew Garthwaite, the head of global equity strategy at Credit Suisse wrote in the report today. “The preconditions for a double-dip in the U.S. are not in place. Equities are discounting a scenario somewhere between a soft landing and a mild hard landing.”
Yell Group tumbled 19 percent to 24.5 pence, erasing yesterday’s 13 percent jump. The publisher of the U.K.’s yellow pages directories said first-quarter profit fell 26 percent to 11.1 million pounds ($17.3 million) as sales declined.
Nexans, Invensys
Nexans sank 8.5 percent to 51.25 euros after the company said price pressure in some high-voltage cables and the European building market pushed profitability to 4 percent of revenue, down from 5.3 percent a year earlier.
Invensys dropped 4.7 percent to 279.1 pence, leading technology-related shares to the biggest decline among 19 industry groups in the Stoxx 600, after announcing a 13 million- pound charge to its rail business.
Ericsson AB, the world’s biggest maker of mobile-phone networks, fell 3.5 percent to 77.7 kronor and Atos Origin SA sank 4.1 percent to 32.19 euros.
CSR Plc plunged 14 percent to 355.5 pence as the maker of microchips used in Nokia Oyj mobile phones said it sees “growing caution in the macroeconomic outlook” for the second half of 2010.
Safran SA and Infineon Technologies AG climbed more than 2.5 percent after increasing their earnings outlooks.
Safran Surges
Safran rallied 6.5 percent to 21.51 euros. Europe’s second- biggest maker of aircraft engines raised its forecast for 2010 and predicted profitability will improve as air traffic and demand for services rebounds. First-half profit gained 7.7 percent to 223 million euros ($290 million).
Infineon climbed 2.6 percent to 5.18 euros. Europe’s second-largest chipmaker raised its 2010 outlook for a third time on semiconductor demand from makers of cars and consumer electronics.
Deutsche Boerse AG rallied 4 percent to 54.06 euros after reporting second-quarter profit excluding some items of 1.20 euros a share. That beat the 91-cent average projection of 13 analysts surveyed by Bloomberg. Europe’s largest exchange operator by market value also said costs in 2010 will be lower than it projected.
Portugal Telecom SGPS SA gained 2.8 percent to 8.53 euros. Portugal’s biggest phone company agreed to sell its stake in Vivo Participacoes SA, Brazil’s largest wireless company, to Telefonica SA after the Spanish company raised its bid for a third time to 7.5 billion euros.
Separately, Portugal Telecom agreed to pay 8.44 billion reais ($4.8 billion) for 22.4 percent stake in Brazil’s biggest phone operator, Telemar Norte Leste, to remain in the Brazilian telecommunications market.
EFG International AG sank 20 percent to 12.55 Swiss francs, the biggest retreat since February 2009. The Swiss bank posted a first-half loss of 809.8 million francs ($764 million) after writing down goodwill on two hedge fund businesses and a Swedish asset manager.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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