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Most European Stocks Retreat as Economic Growth Misses Estimates

Most European stocks fell, with the Stoxx Europe 600 Index snapping its biggest three-day rally since May 2010, as the economies of the euro area and Germany grew at a slower-than-estimated pace.

Terna Rete Elettrica Nazionale SpA (TRN) retreated 14 percent as investors speculated that taxes will lessen the Italian power- grid operator’s earnings. Enel SpA (ENEL), Italy’s largest power producer, decreased 4.3 percent. Severn Trent Plc (SVT), Pennon Group Plc (PNN) and United Utilities Group Plc (UU/) declined more than 1 percent as Goldman Sachs Group Inc. recommended selling the shares of the U.K. utilities.

The benchmark Stoxx 600 slid 0.1 percent to 237.56 at the 4:30 p.m. close in London as three stocks dropped for every one that climbed. The gauge has tumbled 18 percent since this year’s high on Feb. 17 amid concern that global economic growth is faltering.

“Macro surprises for the euro zone and the U.S. do not show convincing signs of a bottom,” wrote Bernd Meyer, the head of cross-asset strategy at Commerzbank AG in Frankfurt, in a report. “One should only add to risk assets if the macro outlook stabilizes.”

Stocks recouped some losses as Fitch Ratings affirmed its AAA credit rating on the U.S. and industrial production in the world’s largest economy climbed in July by the most this year

National benchmark indexes dropped in 13 of the 18 western European markets. The U.K.’s FTSE 100 Index climbed 0.1 percent and France’s CAC 40 Index slid 0.3 percent, while Germany’s DAX Index sank 0.5 percent.

Euro-Area Economy

Gross domestic product in the 17-nation euro area rose 0.2 percent from the first quarter, when it increased 0.8 percent, the European Union’s statistics office in Luxembourg said in a statement today. That’s the worst performance since the euro region emerged from a recession in late 2009. Economists had forecast the economy to expand 0.3 percent, according to the median of 34 estimates in a Bloomberg News survey.

Germany’s economy, Europe’s largest, almost stalled in the second quarter. Gross domestic product, adjusted for seasonal effects, climbed 0.1 percent from the first quarter, when it jumped a revised 1.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists had predicted growth of 0.5 percent, according to the median of 33 estimates in a Bloomberg News survey.

The Stoxx 600 had rallied 6.4 percent over the past three days after a global equity rout left stocks trading at their cheapest valuation since March 2009 amid concern the economic recovery is stalling. The gauge traded at 9.8 times the estimated earnings of its companies, according to data compiled by Bloomberg. That compares with the average multiple of 12.2 over the past five years.

Warren Buffett Buys

Billionaire investor Warren Buffett used the slump to buy stocks. His Berkshire Hathaway Inc. made its biggest bets on the stock market this year on Aug. 8 as the S&P 500 plunged the most since December 2008.

“I like buying on sale,” Buffett, Berkshire’s chief executive officer and head of investments, said in a television interview with Charlie Rose to be broadcast on PBS. “Last Monday, we spent more money in the stock market buying than any day this year.”

Asset allocations in equities fell by the most on record this month as a “gloomy” outlook for economic growth prompted investors to pile into cash, a BofA Merrill Lynch Global Research survey showed.

Terna, Enel, Snam

Utilities shares slid 2 percent, for the biggest decline among the 19 industry groups in the Stoxx 600.

Terna plunged 14 percent to 2.49 euros, its largest drop since 2004, and Enel slid 4.3 percent to 3.47 euros. Snam Rete Gas SpA (SRG), the owner of Italy’s natural-gas grid, tumbled 9.9 percent to 3.33 euros.

Italy approved a law at the weekend that increased the tax on power generators to 10.5 percent from 6.5 percent and extended the levy to distribution and transmission companies. Prime Minister Silvio Berlusconi’s government will get 1.8 billion euros ($2.6 billion) in 2012 and 900 million euros in the following two years from the tax changes, according to UniCredit SpA.

Severn Trent retreated 2.2 percent to 1,461 pence after the company was downgraded to “sell” from “neutral” at Goldman Sachs. The brokerage also cut Pennon, which fell 2 percent to 655 pence, and United Utilities, which slipped 1.1 percent to 592.5 pence, to “sell.”

Intercell, Lundin Petroleum

Intercell AG (ICLL) surged 20 percent to 3 euros as the Austrian vaccine maker said its second-quarter loss narrowed to 1.6 million euros from 8.35 million euros a year earlier. That beat the average estimate of eight analysts surveyed by Bloomberg for a loss of 8.7 million euros.

Lundin Petroleum AB (LUPE) rallied 13 percent to 90.30 kronor. Statoil ASA (STL), Norway’s biggest oil and gas producer, said that two North Sea discoveries hold as much as 1.2 billion barrels of recoverable oil in total, which would make them the country’s largest oil find since the 1980s. Aldous-Avaldsnes is located west of Lundin’s Avaldsnes find.

“It’s probably the largest offshore oil discovery anywhere in the world this year,” Tim Dodson, Statoil’s executive vice president for exploration, said in an Oslo interview.

Statoil’s shares gained 2.9 percent to 126.10 kroner.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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