European stocks tumbled to the lowest level in 11 months amid concern that a slowdown in the world’s largest economy may derail global growth.
Auto-industry shares led the selloff as Fiat SpA (F) and PSA Peugeot Citroen lost more than 4 percent. Pandora A/S tumbled 65 percent as the Danish jewelry maker posted earnings that missed estimates. Metro AG (MEO) slid 7.5 percent as Germany’s biggest retailer said profit dropped. Wacker Chemie AG (WCH), the second- largest producer of solar-grade silicon, plunged 10 percent.
The Stoxx Europe 600 Index retreated 1.9 percent to 256.98 at the 4:30 p.m. close in London, the lowest level since Aug. 31. European stocks yesterday were the first major region to enter a so-called correction, with the Stoxx 600 dropping 10 percent from this year’s highest level, as falling Spanish and Italian bonds showed the sovereign-debt crisis is spreading.
“There’s a vicious circle between markets and the economy, with poor economic data refueling negative sentiment,” Philippe Gijsels, head of research at BNP Paribas (BNP) Fortis Global Markets, said in a phone interview from Brussels. “There are enough elements on the table to create a nervous environment.”
National benchmark indexes fell in all 18 western European markets today. The U.K.’s FTSE 100 lost 1 percent, Germany’s DAX declined 2.3 percent and France’s CAC slid 1.8 percent. The Swiss Market Index (SMI) tumbled 4.1 percent after reopening following yesterday’s holiday as UBS AG (UBSN) and Credit Suisse Group AG (CSGN) sank more than 7 percent.
Stocks extended losses as U.S. Commerce Department figures showed consumer purchases fell 0.2 percent in June, the first drop in almost two years. The median estimate of 77 economists surveyed by Bloomberg called for a 0.1 percent increase.
Italian and Spanish 10-year bonds dropped today, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.
Wrangling between Republicans and Democrats over increasing the U.S.’s debt ceiling has also fueled concern in recent weeks. Congressional leaders voiced confidence that the Senate will approve today a debt-limit compromise after the House voted 269- 161 to approve the measure, which boosts the national debt limit enough to fund the government until 2013.
Even so, both Standard & Poor’s and Moody’s Investors Service are weighing whether to cut the nation’s credit rating. S&P said last month that the political impasse has boosted to 50 percent the chance that it will downgrade the U.S. from AAA within three months.
‘Deteriorating Economic Picture’
“The focus has now shifted to the global economy with manufacturing deteriorating across most global economies,” said Chris Weston, a trader at IG Markets in Melbourne. “We are clearly seeing an investment strike in global equity markets and a deteriorating economic picture just detracts the investment case from stocks as an attractive asset class.”
More European companies have missed analysts’ estimates since July 11 than in any earnings season in at least five years. About 51 percent of companies in the Stoxx 600 have posted earnings that fell short of projections, according to data compiled by Bloomberg, while 78 percent of S&P 500 companies that reported earnings have exceeded forecasts.
Fiat led a selloff in carmakers, tumbling 8.4 percent to 6.09 euros, the biggest drop in more than two years. Peugeot, Europe’s second-biggest carmaker, fell 4.8 percent to 24.28 euros and Volkswagen AG (VOW), the region’s largest automaker, declined 4.1 percent to 132.45 euros.
Gauges of insurers, construction companies and basic- resource stocks also tumbled, falling more than 2.5 percent.
Pandora tumbled 65 percent to 51 kroner, its biggest drop on record, after cutting its full-year forecast and reporting that Chief Executive Officer Mikkel Vendelin Olesen quit. The company also posted second-quarter earnings before interest and taxes of 440 million kroner ($84 million), compared with an average analyst estimate of 611 million kroner in a Bloomberg survey. Pandora’s sales in July plunged about 30 percent.
Metro dropped 7.5 percent to 34.97 euros, the largest decline in 2 1/2 years, as the retailer’s Media-Saturn consumer- electronics unit posted the first loss in at least 20 years. The company said second-quarter net income fell to 40 million euros ($57 million), missing a 87.8 million-euro analyst estimate. Sales were little changed at 15.7 billion euros. Analysts had estimated revenue of 15.8 billion euros.
Wacker Chemie retreated 10 percent to 116.45 euros after saying profit rose to 142.7 million in the second quarter, missing the 152 million-euro average estimate in a Bloomberg survey of seven analysts.
Northumbrian Water Group Plc (NWG) advanced 4.5 percent to 469.5 pence. Cheung Kong Infrastructure Holdings Ltd., the company controlled by Hong Kong billionaire Li Ka-Shing, agreed to buy the U.K. utility for about 2.4 billion pounds ($3.9 billion).
Rotork Plc (ROR) gained 8.1 percent to 1,695 pence as the company predicted that full-year sales will be “materially ahead” of previous forecasts because of strong order intake.
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