European Stocks Fall on Growth Concern as Porsche Shares Plunge
European stocks slid, with the benchmark Stoxx Europe 600 Index extending its weekly decline, amid concern the global economic recovery is stalling.
Porsche SE plunged 14 percent after Volkswagen AG (VOW) said it will no longer complete its merger with the carmaker by the end of the year because of pending lawsuits. STMicroelectronics NV (STM) slipped 4.6 percent after Texas Instruments Inc. (TXN) cut its sales forecast. Verbund AG (VER) lost 12 percent after forecasting that profit will decline this year.
The Stoxx 600 retreated 2.6 percent to 224.59 at the 4:30 p.m. close in London, extending its weekly drop to 3.7 percent. The gauge 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 economic situation is getting worse,” said Markus Steinbeis, head of equity portfolio management at the Unterfoehring, Germany-based unit of Pioneer Investments KGmbH, which oversees about $221 billion globally. “It depends more than ever on what policy makers will do. As long as economic indicators remain as they are right now and emerging markets are tightening their monetary policies, the upside should be limited.”
European stocks extended their declines as the European Central Bank said that Executive Board member Juergen Stark has resigned for “personal reasons.” Stark will keep his post until the central bank appoints his successor.
National benchmark indexes retreated in every western- European market. Germany’s DAX Index (DAX) slid 4 percent, while the U.K.’s FTSE 100 Index dropped 2.4 percent. France’s CAC 40 Index fell 3.6 percent.
Group of Seven
Treasury Secretary Timothy F. Geithner said today he expects no concerted action from the Group of Seven nations meeting getting underway in Marseille, France, adding that the sessions will not produce any “dramatic change.” Geithner, speaking in an interview with Bloomberg Television, said that Europe is under “enormous pressure.”
In the U.S., President Barack Obama challenged Congress to pass a $447 billion jobs plan tilted toward the Republican prescription of tax cuts.
The president, addressing a joint session of Congress yesterday, demanded six times that lawmakers act “right away” on a plan to boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.
A report today showed inflation in Germany, Europe’s largest economy, slowed in August less than initially projected, as energy costs increased. The inflation rate, calculated using a harmonized European Union method, fell to 2.5 percent from 2.6 percent in July, according to the Federal Statistics Office in Wiesbaden.
In China, a separate report showed that the country’s inflation eased in August from a three-year high as gains in food prices moderated, giving policy makers more room to pause monetary tightening as the economy cools and a global slowdown threatens exports and jobs.
Consumer prices climbed 6.2 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That matched the 6.2 percent median forecast in a Bloomberg News survey of 31 economists.
Porsche tumbled 14 percent to 37.99 euros, its biggest decline since May 2009, as Volkswagen, Europe’s largest carmaker, delayed its merger with the maker of the 911 sports car. Volkswagen’s preferred shares fell 3.9 percent to 103.75 euros.
“From Volkswagen’s perspective, the continuing legal hurdles mean that it is currently impossible to quantify the economic risks of a merger and therefore to perform the valuation of Porsche SE,” the company said. “The main causes of uncertainty are the ongoing proceedings and actions brought against Porsche SE in Germany and the USA for alleged market manipulation.”
European carmakers and construction shares, whose earnings are tied to economic growth, were among the worst performers on the Stoxx 600 today, dropping more than 4 percent.
A gauge of banks retreated 5.3 percent as Societe Generale (GLE) SA plummeted 11 percent to 17.45 euros, its lowest price since 1995. BNP Paribas (BNP) SA and Barclays Plc (BARC) lost more than 7 percent.
The ECB plans to dilute a proposal to wean distressed banks off its emergency funding on concern it would exacerbate the region’s debt crisis, two euro-area officials familiar with the deliberations said.
STMicro Shares Slide
STMicroelectronics, Europe’s largest chipmaker, fell 4.6 percent to 4.19 euros. Texas Instruments, the biggest maker of analog chips, predicted third-quarter profit of 56 cents to 60 cents a share on revenue of $3.23 billion to $3.37 billion. Analysts on average had estimated profit of 60 cents on sales of $3.5 billion, according to data compiled by Bloomberg.
Verbund sank 12 percent to 22.20 euros, its largest drop since at least 1991. Austria’s biggest power company predicted an operating profit of 780 million euros ($1.07 billion) and net income of 380 million euros, according to a statement late yesterday. Verbund had previously projected the measures would “remain at nearly the same level as in the previous year,” when it had operating profit of 828.5 million euros and net income of 400.8 million euros.
Deutsche Boerse Drops
Deutsche Boerse AG (DB1) slid 4 percent to 39.37 euros after deciding against a compulsory purchase of stock, a so-called squeeze out, from the minority of shareholders who have yet to approve the owner of the Frankfurt Stock Exchange’s combination with NYSE Euronext.
“The expectation of a squeeze out happening in the near term has receded,” said Richard Perrott, exchange analyst at Berenberg Bank AG in London. “That has been underpinning the Deutsche Boerse stock.”
Admiral Group Plc (ADM), a British motor insurer, slumped 4.2 percent to 1,307 pence as the U.K.’s Ministry of Justice said it would ban so-called referral fees in personal-injury cases to help stem rising insurance costs.
Societe Television Francaise 1 (TFI) sank 7.2 percent to 9.54 euros, its lowest price in more than two years, as the operator of the TF1 channel was downgraded to “neutral” from “overweight” at JPMorgan Chase & Co.
Veolia, Tecnicas Reunidas
Veolia Environnement SA (VIE) lost 6 percent to 10.22 euros as the world’s biggest water company was rated “underweight” in resumed coverage at Morgan Stanley.
Tecnicas Reunidas SA (TRE), a Spanish provider of engineering and construction services to the energy industry, retreated 5.3 percent to 25.10 euros after Goldman Sachs Group Inc. recommended selling the shares in new coverage.
Tullow Oil Plc (TLW) surged 15 percent to 1,413 pence, its largest gain since 2008, as the U.K. explorer behind west Africa’s biggest offshore discovery in a decade made a find off the coast of French Guiana.
“We continue to believe that Tullow offers an outstanding growth story among European oils and remains a top pick in the sector,” analysts at Bank of America Corp., including London- based Alejandro Demichelis and Alexander Holbourn, wrote in a report today.
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