European Stocks Fall Most in a Month; Randgold, UniCredit Shares Retreat
European stocks dropped the most in a month amid speculation this year’s rally has pushed valuations on equities beyond the outlook for corporate and economic growth.
Taylor Wimpey Plc and Barratt Developments Plc led declines on the Stoxx Europe 600 Index as all 19 industry groups retreated. Randgold Resources Ltd. fell 2.4 percent. UniCredit SpA, Italy’s biggest bank, lost 3.1 percent as yields on Italian government bonds auctioned today rose.
The Stoxx 600 lost 1.3 percent to 277.02 at the 4:30 p.m. close in London, the biggest drop since Nov. 29 and trimming its gain for 2010 to 9.1 percent. Stocks have climbed this year as surging corporate profits and actions by central banks to support growth overcame concern that Europe’s sovereign-debt crisis would derail the recovery. The advance has driven the value of the Stoxx 600 to about 12 times the estimated profits of its companies, the highest level in eight months, according to data compiled by Bloomberg.
“It’s not surprising to see the market pull back given the robust performance we’ve had for stocks this year,” said Richard Hunter, London-based head of U.K. equities at Hargreaves Lansdown Plc. “Volumes are very thin and moves are getting exagerated.”
The Stoxx 600 last week capped its longest stretch of weekly gains since April and wiped out losses since the bankruptcy of Lehman Brothers Holdings Inc. in September 2008.
ProSiebenSat.1 Media AG and Weir Group Plc have posted the biggest gains on the Stoxx 600 this year as profit topped estimates. National Bank of Greece SA, Piraeus Bank SA and Bank of Ireland were the worst performers after the European Union led bailouts for the two nations.
Volumes Tumbled
Volumes in stocks traded have tumbled this week amid the Christmas and New Year holidays. About 1.7 billion shares of companies in the Stoxx 600 changed hands today, compared with a daily average of about 4.2 billion over the past year, according to data compiled by Bloomberg.
European stocks slid today even after better-than-estimated reports on U.S. unemployment and home sales. First-time filings for unemployment insurance decreased by 34,000 to 388,000 in the week ended Dec. 25, compared with the median forecast of 415,000, Labor Department figures showed today in Washington. The National Association of Realtors index of pending home resales increased 3.5 percent, topping the median forecast in a Bloomberg News survey for a 0.8 percent rise.
China Growth
A report today showed China’s manufacturing growth slowed for the first time in five months in December as the government tightened monetary policy and chased energy-efficiency and pollution targets. A purchasing managers’ index by HSBC Holdings Plc and Markit Economics fell to 54.4 from 55.3 in November. The data are seasonally adjusted and a reading above 50 indicates an expansion.
National benchmark indexes fell in all 18 western European markets except Luxembourg. Germany’s DAX lost 1.2 percent, the U.K.’s FTSE 100 dropped 0.4 percent and France’s CAC 40 slid 1 percent.
Taylor Wimpey declined 1.1 percent to 31.28 pence. Barratt Developments lost 1 percent to 89.95 pence.
Randgold, a producer of the metal in West Africa, slid 2.4 percent to 5,315 pence.
Cable & Wireless Communications led telecommunication shares lower in Europe, dropping 3.7 percent to 48.61 pence, as its shares fell below their 20- and 50-day moving average.
Italian Auction
UniCredit lost 3.1 percent to 1.55 euros. Yields on Italian government bonds and notes auctioned today rose compared with previous sales as concern about levels of sovereign debt in Europe continued to weigh on sentiment.
Italy sold 3 billion euros ($4 billion) of 2.25 percent 2013 bonds to yield 3.25 percent, compared with a yield of 2.86 percent in the last auction of comparable securities on Nov. 29.
Fiat SpA rose 2.9 percent to 15.43 euros. The demerger of Fiat Industrial will be effective as of Jan. 3, with every Fiat shareholder owning one Fiat share and one Fiat Industrial share.
“We value Fiat SpA at 9.2 euros per share and Fiat Industrial at 8.1 euros per shares,” Gruppo Banca Leonardo said in a note today. “We reiterate our positive view as the demerger should allow the two companies to follow different paths with a greater freedom in making alliances to increase scale.”
To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net
To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.
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