European Stocks Drop for Second Day on U.S. Economic Data; Tullow Falls
European stocks declined for a second day, extending a five-week low, after lower-than-forecast U.S. durable-goods orders and new-home sales added to mounting concern about the strength of the world’s largest economy.
Tullow Oil Plc lost 4.6 percent after saying its purchase of Heritage Oil Plc’s assets in Uganda might be delayed. SNS Reaal Groep NV plunged 11 percent after the Dutch life insurer and bank reported earnings that missed analysts’ estimates. EFG Eurobank Ergasias SA led a decline in Greek banks as the yield premium investors demand to hold the nation’s 10-year bonds over German bunds soared.
The benchmark Stoxx Europe 600 Index fell 0.8 percent to 247.54 at the 4:30 p.m. close in London, the lowest level since July 20. The measure has dropped 9 percent from this year’s high in April as data on U.S. house prices, jobs and manufacturing cast doubt on the economic recovery.
“The fact is we are going to be in for slower, lower growth,” said Justin Urquhart Stewart, who helps oversee about $3.3 billion at 7 Investment Management in London. “These are the dog days of August, volumes are low so relatively small inputs can have a disproportionate impact on the market.”
Stocks extended declines after a Commerce Department report showed orders for U.S. durable goods rose 0.3 percent in July, missing the 3 percent median estimate of economists in a Bloomberg survey. Separate figures showed sales of new homes unexpectedly dropped to the lowest level on record.
Benchmark Indexes
National benchmark indexes declined in all 18 western European markets, except Ireland. France’s CAC 40 dropped 1.2 percent and Germany’s DAX slid 0.6 percent. The U.K.’s FTSE 100 retreated 0.9 percent.
Ireland’s ISEQ rose 0.6 percent even after Standard & Poor’s downgraded the nation’s credit rating to AA-, citing concern about the cost of supporting its struggling banks.
The decline in European stocks has left the Stoxx 600 trading at 14.7 times the reported earnings of its companies, near the cheapest valuation since 2008, according to data compiled by Bloomberg.
Tullow Oil dropped 4.6 percent to 1,238 pence after the oil explorer said the purchase of Heritage Oil’s Ugandan assets may be delayed by a tax dispute between the government and Heritage. The company also reported first-half net income that more than doubled to $81.7 million.
SNS Slides
SNS Reaal tumbled 11 percent to 3.47 euros after reporting first-half profit adjusted for one-off items of 87 million euros ($110 million). That missed the 92 million-euro average estimate of five analysts surveyed by Bloomberg.
Chief Executive Officer Ronald Latenstein said at a press briefing that the insurer currently isn’t in talks about repaying the rest of the aid it received from the Dutch State and Stichting Beheer SNS Reaal.
Eurobank, Greece’s second-biggest bank, tumbled 6.4 percent to 4.70 euros, the most in almost three months. Alpha Bank SA slid 5 percent to 4.96 euros.
The Greek-German yield spread widened 46 basis points to 930 basis points as concern resurfaced that some European countries will struggle to contain their deficits. That’s the first time it had surpassed 900 since the European Union announced a regional rescue plan in May.
Basic-resources stocks posted the biggest drop among 19 industry groups in the Stoxx 600 as copper fell to a four-week low. Antofagasta Plc, the copper producer controlled by Chile’s Luksic family, fell 3.4 percent to 977.5 pence. Kazakhmys plc slid 2.7 percent to 1,073 pence.
Stoxx Membership
Allied Irish Banks Plc slid 2.9 percent to 77.5 euro cents as Stoxx Ltd. said the lender will be among seven companies removed from the Stoxx 600 from next month after its regular quarterly membership review.
Yell Group Plc, which will also be excluded from the benchmark gauge, tumbled 7.4 percent to 14.85 pence for the biggest drop in the Stoxx 600.
Vestas Wind Systems A/S slid 4.1 percent to 228 kroner after the world’s biggest wind-turbine maker was downgraded at Sanford C. Bernstein & Co. and NordLB.
Ageas paced advancing shares, rising 2.2 percent to 1.99 euros. The insurer formerly known as Fortis reported first-half profit from its insurance operations of 180.5 million euros, beating analysts’ estimates. The company also said the sovereign-debt crisis hardly affected its book value.
Admiral Group Plc climbed 2.7 percent to 1,512 pence. The U.K.’s best-performing insurance stock this year reported a 21 percent gain in pretax first-half profit to 126.9 million pounds ($196 million) as customer numbers increased to a record high.
Lagardere SCA advanced 4 percent to 29.05 euros after Exane BNP Paribas raised its recommendation for France’s biggest publisher to “outperform” from “underperform.”
Paddy Power Plc gained 2.5 percent to 26.66 euros after Ireland’s biggest bookmaker said it expects to beat analyst estimates for the year following “strong” growth in its online and U.K. retail units during the first half.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.
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