European stocks fell as a report showed that the U.S. economy grew more slowly than estimated, offsetting Federal Reserve Chairman Ben S. Bernanke’s prediction that the recovery is secure in the long term.
Lanxess AG (LXS) tumbled 5.8 percent after the German chemical maker said that its chief executive officer sold shares. Frontline Ltd. declined 2.4 percent after reporting a loss in the second quarter that was wider than analysts had estimated. EFG Eurobank Ergasias SA (EUROB) and Piraeus Bank SA (TPEIR) plummeted at least 6 percent.
The benchmark Stoxx Europe 600 Index fell 0.7 percent to 225.52 at the 4:30 p.m. close in London, after earlier losing as much as 2.7 percent, bringing this week’s gain to 1.1 percent. The Stoxx 600 has fallen 23 percent from this year’s peak on Feb. 17 as European and U.S. economic reports trailed forecasts, adding to concern that the global economic recovery is at risk. The decline left the index trading at 9.4 times its companies’ estimated earnings, near the lowest valuation since March 2009.
“Traders catch on to the reverse logic of Bernanke not doing anything, as he probably would if the situation had been bad enough to demand a response,” Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen, said. “We should be cautious about how much bad news to price in.”
Stocks gyrated following the Bernanke speech, in which he said the central bank still has tools to stimulate the economy without signaling he will use them. He echoed comments of dissenting members of the Federal Open Market Committee who said U.S. economic data aren’t pointing to a recession.
U.S. GDP Report
A Commerce Department report showed that the U.S. economy grew 1 percent at an annual pace in the second quarter, a slower rate than the agency’s previous estimate of 1.3 percent. Economists had predicted expansion of 1.1 percent, according to the median of 81 forecasts in a Bloomberg News survey.
A separate report showed that the Thomson Reuters/University of Michigan final index of consumer sentiment slumped to 55.7 in August from 63.7 in July. That was in line with the average of 61 economist estimates compiled by Bloomberg.
Growth in loans to households and companies in the 17-nation euro area slowed in July as the region’s debt crisis weakened economic expansion and damped demand for credit. Loans to the private sector grew 2.4 percent from a year earlier after advancing at an annual rate of 2.5 percent in June, the European Central Bank said today.
German Equity Futures
Traders yesterday sold German equity futures to hedge their investments before France, Italy and Spain extended curbs on short selling. Spain and Italy extended their bans through Sept. 30, regulators in both countries said in a statement. France’s Autorite des Marches Financiers said its ban may last until Nov. 11. The benchmark DAX Index lost 0.8 percent today.
“We have seen several large investors, both hedge funds and long-only equity investors, hedge their portfolios and sell large amounts of DAX futures, hence exerting a large selling pressure,” Sushil Krishan, a derivatives salesman at UniCredit Bank AG in Munich, said in a phone interview. “Hedge funds are likely doing it as a speculative bet, while institutional investors use it as a hedge.”
National benchmark indexes fell in 13 of the 18 western European markets. The U.K.’s FTSE 100 Index lost less than 0.1 percent, while France’s CAC 40 Index (CAC) slid 1 percent.
Lanxess, Frontline Fall
Lanxess slumped 5.8 percent to 39.79 euros, its lowest price in 11 months, after the company said in a statement that CEO Axel Heitmann sold almost his entire holding in the company, raising 9.88 million euros ($14.3 million). It is only the second time a board member has sold shares since Lanxess went public in 2005, according to company filings.
Frontline dropped 2.4 percent to 34.63 kroner after the world’s biggest operator of supertankers reported a second-quarter net loss of $35.2 million. That was wider than the $30.2 million average loss of 17 analyst estimates compiled by Bloomberg. The company announced a cash dividend of 2 cents for the quarter. The company said it expects the “weak trend” will persist into the third quarter.
Alpha Bank SA and EFG Eurobank Ergasias retreated 5 percent to 1.90 euros and 6 percent to 1.73 euros, respectively, before reporting earnings next week. National Bank of Greece SA (ETE) slipped 7.6 percent to 2.78 euros, while Piraeus Bank SA sank 6.7 percent to 56 euro cents. UBS AG said the Mediterranean country’s debt crisis “remains challenging.”
Credit Suisse Group AG said it expects the Greek banks’ underlying second quarter to be “significantly down” on the first quarter. The Swiss brokerage doesn’t recommend buying any Greek lenders.
Amec, Roche Slide
Amec Plc (AMEC), the U.K.-based oil and gas engineer, declined 3 percent to 849.5 pence after Societe Generale SA downgraded the stock to “hold” from “buy.”
Rautaruukki Oyj (RTRKS) fell 5.1 percent to 9.45 euros, its lowest price since February 2005, as the Finnish steelmaker was cut to “hold” from “buy” at Deutsche Bank AG.
Gildemeister AG (GIL) rallied 6.5 percent to 10.97 euros as the German maker of cutting tools said it plans to buy back as many as 3.1 million shares, or 5.1 percent of its share capital. The company added that it is considering using the repurchased stock as an “acquisition currency.”
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