European stocks fell the most in two weeks, led by basic-resources and technology shares, after China raised its benchmark interest rate and Apple Inc. (AAPL)’s earnings forecast missed analyst estimates.
Rio Tinto Group and Xstrata Plc fell more than 3 percent as the People’s Bank of China increased its lending and deposit rates for the first time since 2007. ARM Holdings Plc (ARM), the designer of chips that power Apple’s iPhone, sank 2.6 percent. Banks limited declines as Goldman Sachs Group Inc. and Bank of America Corp. reported earnings excluding one-time items that topped analyst estimates.
The Stoxx Europe 600 Index lost 0.5 percent to 265.24 as of the 4:30 p.m. close in London, the biggest drop since Oct. 4. The gauge has climbed 2.1 percent this month, closing at the highest level since April yesterday, amid speculation that the Federal Reserve will announce further plans to stimulate economic growth at its November meeting.
“Today’s action by the PBOC will likely have a negative impact on risk assets worldwide,” Pierre Lapointe, a global macro strategist at Brockhouse & Cooper Inc., which manages $500 million in Montreal, wrote in a report. “Chinese monetary policy was inappropriately expansionist given the strength of the country’s recovery.”
Mining Companies Fall
Rio Tinto, the world’s third-largest mining company, dropped 3.2 percent to 3,948 pence. Xstrata slid 4.4 percent to 1,248.5 pence. A gauge of basic-resource shares retreated 2.5 percent, the biggest decline among 19 industry groups in the Stoxx 600.
China, the biggest consumer of copper, said the one-year deposit rate will increase to 2.5 percent from 2.25 percent and the lending rate will increase to 5.56 percent from 5.31 percent, effective tomorrow. China’s inflation quickened to 3.5 percent in August, highlighting overheating risks that have prompted the government to curb credit and clamp down on the real-estate market.
ARM fell 2.6 percent to 388.7 pence. Apple forecast profit will be about $4.80 a share in the fourth quarter, which includes the yearend holiday shopping season. Analysts surveyed by Bloomberg had predicted profit of $5.03. Apple has exceeded analysts’ earnings projections every quarter since at least 2005, according to data compiled by Bloomberg.
Of the 15 companies in the Stoxx 600 that have announced results since Oct. 7, 10 have beaten analyst estimates for per-share income, according to data compiled by Bloomberg. In the U.S., 39 of the 47 Standard & Poor’s 500 Index companies that have announced results in the same period have topped forecasts, the data show. Analysts predict 24 percent growth in third-quarter profit from a year earlier for S&P 500 companies, a fourth straight increase, Bloomberg data show.
“Earnings are taking centre stage and investors are ignoring background noise a bit,” Monika Rosen, Vienna-based head of research at UniCredit Private Bank, said on Bloomberg Television’s Countdown with Maryam Nemazee. “If they manage to give a better outlook for the current quarter then the market is prepared to view the glass as being half full.”
Porsche SE preferred shares slumped 8.7 percent to 38.97 euros after Volkswagen AG (VOW) Chief Executive Officer Martin Winterkorn said Europe’s largest automaker may put its merger with the producer of the 911 sports car on hold.
“It can’t be ruled out that the legal proceedings may drag on for some time to come until a final decision is reached,” Winterkorn, who also heads Porsche’s board, said in the text of a speech today in Stuttgart. “For that reason, the planned merger could possibly be delayed.” VW preferred stocks slid 1.3 percent to 90.30 euros.
Banks advanced as Goldman Sachs and bank of America released third-quarter results. Deutsche Bank AG (DBK), Germany’s largest lender, gained 1.8 percent to 42.20 euros. UBS AG (UBSN), the biggest Swiss bank, rose 1.7 percent to 17.58 francs.
The Basel Committee on Banking Supervision said banks will have until 2015 to fully implement rules on how much cash and liquid securities they must hold to gird against a funding shortage in a crisis. The committee also said it would review the rules to make sure they aren’t too onerous.
SKF AB (SKFB) jumped 10 to 168 kronor, the highest level since at least 1989. The world’s largest maker of ball bearings reported third-quarter net income of 1.39 billion kronor ($208 million), topping the 1.18 billion-krona average estimate in a Bloomberg survey of analysts.
To contact the reporter on this story: Adam Haigh in London at email@example.com