European Stocks Decline as U.S. Unemployment Rises; Barclays, Xstrata Drop
European stocks dropped after an unexpected increase in the U.S. unemployment rate added to concern that the global economic recovery is stalling, even as the Stoxx Europe 600 Index snapped three weeks of losses.
“This is worrying,” Philip Gijsels, head of research at BNP Paribas Fortis Global Markets, said. “We are in the middle of a muddle-through stage for the economy. There are still plenty of risks going into 2011.”
Old Mutual Plc and Barclays Plc led a retreat among financial shares after the U.S. Labor Department’s report. Deutz AG slumped 9.7 percent as shareholders sold 20 percent of the stock.
The Stoxx 600 dropped 0.3 percent to 270.94 at the 4:30 p.m. close in London. The gauge completed its biggest two-day rally since July yesterday as the European Central Bank extended its emergency loan and bond-buying programs and housing data added to confidence that the U.S. economy will continue to recover. The gauge closed within 1 percent of its 2010 high reached on Nov. 9 as it gained 1.6 percent this week, paring the previous three weeks of losses.
National benchmark indexes dropped in nine of the 18 western European markets. The U.K.’s FTSE 100 Index lost 0.4 percent, Germany’s DAX Index declined 0.1 percent and France’s CAC 40 Index gained 0.1 percent.
U.S. employers added 39,000 jobs in November, fewer than the most pessimistic prediction of economists surveyed by Bloomberg News, after a revised 172,000 increase in October, Labor Department figures showed today in Washington. The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated.
Greece had its ‘BB+’ long-term sovereign credit rating placed on “CreditWatch” with negative implications by Standard & Poor’s Ratings Services. S&P will assess whether “assigning ‘preferred creditor’ status to future official lending” through the proposed European Stability Mechanism “could be detrimental” to bondholders who want to be repaid. The so- called ESM may govern European Union sovereign bonds from July 2013.
The European Central Bank bought Irish government bonds today, according to three traders with knowledge of the transactions. The ECB also purchased Portuguese debt, said two of the people, who asked not to be identified because the deals are confidential. An ECB spokesman in Frankfurt declined to comment.
The Bundesbank raised its forecast for German economic growth this year, predicting the fastest expansion since the bank released its first data for the reunified country in 1992. Gross domestic product will expand 3.6 percent in 2010, 2 percent in 2011 and 1.5 percent in 2012, the Frankfurt-based central bank said in its bi-annual economic outlook today.
Old Mutual, Barclays
Old Mutual, the U.K.’s third-largest insurer by market value, lost 2.5 percent to 120.1 pence. Barclays also declined 2.5 percent to 268 pence.
Deutz slumped 9.7 percent to 5.31 euros. Investors, including Deutz’s largest shareholder Same Deutz-Fahr Holding & Finance, sold a 20 percent stake in the maker of diesel and gas engines at 5.30 euros apiece, according to terms of the offer obtained by Bloomberg News.
GN Store Nord A/S fell 4.4 percent to 47.80 kroner, among the biggest declines on the Stoxx 600, after Telekomunikacja Polska SA filed a complaint about an arbitration procedure.
Berkeley Group Holdings Plc climbed 4.5 percent to 878 pence after the U.K.’s second-largest homebuilder by market value said net income rose to 44.4 million pounds ($69.9 million) in its fiscal first half from 36.9 million pounds a year earlier. Berkeley benefited from an increase in demand for homes in the southeast of England, which started in April 2009, because of its focus on the area. Berkeley sold 1,249 homes in its first half compared with 914 a year earlier.
Rivals Taylor Wimpey Plc and Persimmon Plc rose 4.1 percent to 26.4 pence and 1.6 percent to 378.3 pence, respectively.
STMicroelectronics NV rallied 7.2 percent to 7.47 euros as Exane BNP Paribas upgraded its recommendation on the shares to “outperform” from “neutral” and increased its price estimate 53 percent on shares of Europe’s largest semiconductor maker.
Arkema SA, the French maker of acrylics, climbed 3.4 percent to 52.17 euros after JPMorgan Chase & Co. and Morgan Stanley raised their share-price estimates, citing improved prospects for 2011. JPMorgan analysts, including Martin Evans and Neil Tyler, raised their 12-month price forecast 8 percent to 54 euros. Morgan Stanley boosted its estimate 13 percent to 62 euros.
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