European Stocks Decline on Concern About U.S. Economy; Holcim Shares Slide
European stocks sank to a four-week low as U.S. jobless-benefit claims climbed to the highest level in nine months and Philadelphia manufacturing fell, heightening concern that the world’s largest economy may be tipping back into recession.
Holcim Ltd. led a selloff in construction-related companies after the second-biggest cement maker reported earnings missed estimates. Water companies Pennon Group Plc and United Utilities Group Plc declined more than 2 percent as analysts downgraded the shares. BP Plc, Europe’s second-biggest oil company, and Vedanta Resources Plc fell with commodity prices.
The benchmark Stoxx Europe 600 Index dropped 1.4 percent to 253.9 at the 4:30 p.m. close in London, having earlier climbed as much as 0.7 percent after the Bundesbank boosted its forecast for German growth. The gauge has retreated 6.7 percent from this year’s high on April 15 amid concern that measures to cut government deficits will harm the recovery, outweighing increased forecasts from Siemens AG to Daimler AG.
“We’re cautious on equities in the short term,” said Thomas Tilse, Frankfurt-based head of portfolio strategy at Cominvest Asset Management GmbH, which oversees about $65 billion. “It’s going to be a difficult period. There are still some investment themes to digest, for example the fiscal policies in Europe need to be sorted out,” he said on Bloomberg Television’s “Countdown with Francine Lacqua.”
Benchmark Indexes
National benchmark indexes fell in all 18 western European markets, except Iceland. France’s CAC 40 dropped 2.1 percent and Germany’s DAX slid 1.8 percent. The U.K.’s FTSE 100 sank 1.7 percent.
Stocks erased an earlier advance after a U.S. Labor Department figures showed applications for unemployment benefits last week increased to the highest level since November. Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, exceeding economists’ forecasts.
“Back above 500,000 initial claims we are back into falling payroll numbers again,” said Jonathan Plant, a strategist at Liberum Capital in London. “Questions will be raised about how robust the private sector job creation has been in the U.S. recently.”
Separately, the Federal Reserve Bank of Philadelphia’s general economic index unexpectedly dropped to minus 7.7 in August, signaling the manufacturing rebound is slowing. Economists had forecast the measure would rise to 7, according to the median projections in a Bloomberg News survey.
German Growth
Meanwhile, in Europe, Germany’s Bundesbank raised its 2010 growth forecast for Europe’s largest economy to 3 percent from 1.9 percent. U.K. retail sales jumped in July by almost four times as much as economists forecast, while the government posted a smaller budget deficit than forecast.
Holcim slid 6.3 percent to 63.45 Swiss francs after the company reported a 12 percent drop in second-quarter net income to 399 million francs ($384 million) and said weak European growth threatens its outlook. The average estimate of analysts surveyed by Bloomberg was for profit of 561 million francs.
CRH Plc, the second-largest maker and distributor of building materials, slid 4.4 percent to 14.35 euros. Vinci SA, the world’s biggest builder, lost 2.8 percent to 35.21 euros.
United Utilities, Britain’s largest publicly traded water company, retreated 2.9 percent to 572.5 pence after JPMorgan Chase & Co. downgraded the shares to “neutral” from “overweight.”
Pennon Downgrade
Pennon retreated 3.5 percent to 566 pence as Deutsche Bank AG lowered his recommendation for the shares to “hold” from “buy.” Severn Trent Plc, the U.K.’s second-largest water company, slid 1.7 percent to 1,300 pence. Northumbrian Water Group Plc declined 2 percent to 313.5 pence.
BP lost 2.7 percent to 386.7 pence as crude oil retreated in New York to below $75 a barrel. Total SA fell 2.4 percent to 38.08 euros and Royal Dutch Shell Plc, Europe’s largest oil company, declined 2.7 percent to 1,740 pence.
Vedanta Resources, the mining company that has agreed to buy control of oil explorer Cairn India Ltd., dropped 4.8 percent to 2,073 pence, pacing a decline in base-metal prices. BHP Billiton Ltd. fell 2.2 percent to 1,810 pence and Xstrata Plc slid 2 percent to 1050 pence.
ITV Plc posted the biggest gain in the Stoxx 600, climbing 6.8 percent to 55.95 pence. The U.K.’s biggest commercial broadcaster rallied the most since November after the Daily Mail said that General Electric Co.’s NBC Universal may be interested in a takeover.
Citing speculation by unidentified “dealers,” the Daily Mail said that NBC may be buying ITV shares to prepare a full- scale bid. Susanna Voyle, a spokeswoman for ITV, declined to comment on the speculation.
Hays Group Plc and Michael Page International Plc climbed as Goldman Sachs Group Inc. advised buying shares of the U.K.’s largest recruitment companies. Hays advanced 1.9 percent to 91.9 pence and Michael Page rose 5.8 percent to 403 pence. Goldman Sachs upgraded Hays shares to “buy” from “neutral” and Michael Page to “buy” from “sell.”
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
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