European stocks dropped as investors speculated that China will raise interest rates within weeks to tackle inflation, which accelerated to the fastest pace in 25 months in October.
BHP Billiton Ltd., the world’s largest mining company, led a retreat among raw-material companies, sinking 2.1 percent, as the price of copper headed for its largest decline in two weeks. Bulgari SpA sank 4.8 percent after profit at the world’s third- largest jeweler trailed analysts’ estimates.
The Stoxx Europe 600 Index fell 0.5 percent to 270.18 at the 4:30 p.m. close in London, as all but 5 of 19 industry groups retreated. The gauge has decreased 0.7 percent this week as concern mounted that efforts by indebted European governments to reduce their deficits may derail the economic recovery.
“China is having to rein in inflation,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said in a phone interview from Brussels. “It’s become clear that worries over the global economy remain. Markets were very overbought and this creates the risk of a setback.”
The Stoxx 600 has rallied 7.5 percent since Ben S. Bernanke’s Jackson Hole, Wyoming, speech on Aug. 27. when he indicated that the Federal Reserve would step in to stimulate the ailing economy. The Fed confirmed this month that it will buy an additional $600 billion of Treasuries through June 2011.
National benchmark indexes retreated in 11 of the 18 western European markets today. France’s CAC 40 Index lost 0.9 percent, the U.K.’s FTSE 100 Index slid 0.3 percent and Germany’s DAX Index dropped 0.2 percent. The Stoxx 600 pared some losses as gauges in Spain, Portugal, Greece and Ireland rallied after the nations’ bonds rebounded from a selloff.
European Government Debt
Irish, Spanish, Portuguese and Greek bonds all climbed as Group of 20 leaders meeting in Seoul held emergency talks about the region’s fiscal crisis. The gains sent yields on the two- year notes of Ireland and Portugal down by at least 60 basis points each.
In Europe, gross domestic product in the 16-nation euro area rose 0.4 percent from the second quarter, when it increased 1 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.5 percent, the median of 35 estimates in a Bloomberg News survey showed. Industrial output fell 0.9 percent in September from the previous month, the largest drop in 18 months, a separate report showed.
BHP Billiton, Rio Tinto
Bulgari sank 4.8 percent to 7.10 euros as the jeweler reported third-quarter profit that trailed analysts’ estimates because the company introduced new watch ranges later than last year and sales declined in the Americas.
European Aeronautic, Defence & Space Co. lost 4.5 percent to 18.16 euros even as it increased its guidance for earnings before interest and taxes this year to at least 1.1 billion euros ($1.5 billion) and raised its outlook for free cash flow to about 1 billion euros.
Vivendi SA lost 1.8 percent to 20.20 euros. Vivendi’s tax regime, which allows the company to deduct losses incurred abroad from domestic profit, won’t be renewed when it expires at the end of 2011, French daily La Tribune reported, citing unidentified people.
Royal Vopak, United Internet
Royal Vopak NV tumbled 5.1 percent to 34.45 euros, the largest drop in almost two years. The world’s largest chemical and oil-storage company said third-quarter operating profit excluding one-time items rose 10 percent to 115 million euros.
“We don’t want to sound overly negative, but we note again that the quality of the earnings could be better,” Mutlu Gundogan, an analyst at Royal Bank of Scotland Group Plc, wrote in a report. Gundogan rates Vopak “hold.”
United Internet AG fell 7.4 percent to 10.91 euros, the largest decline in the Stoxx 600, as Citigroup Inc. downgraded its recommendation on the Internet service provider to “hold” from “buy.” Bankhaus Metzler Seel. Sohn & Co. KGaA cut its recommendation on the stock to “sell” from “buy.”
Cie. Financiere Richemont SA gained 4.2 percent to 53.55 Swiss francs as the world’s largest jewelry maker reported higher first-half profit than analysts had predicted as Asian and Middle Eastern consumers bought more Cartier necklaces and Vacheron Constantin watches.
Q-Cells SE rallied 10 percent to 2.95 euros after raising its full-year sales forecast to more than 1.3 billion euros.
Electrocomponents Plc soared 4.8 percent to 259.8 pence. The world’s largest distributor of electronics and maintenance products said first-half profit more than doubled to 34.9 million pounds ($56.5 million).
Some 61 percent of the 294 companies in the Stoxx 600 that have announced results since Oct. 7 have topped estimates for per-share income, according to data compiled by Bloomberg. This compares with 75 percent of S&P 500 companies, the data shows.
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