European Stocks Decline, Led by Tesco, Delhaize, WM Morrizon, J Sainsbury
Jan. 12 (Bloomberg) -- Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, talks about investment strategy and the outlook for the U.S. economy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
European stocks declined after reports that showed U.S. retail sales and initial jobless claims missed economists’ forecasts outweighed lower borrowing costs at Spanish and Italian debt auctions.
Tesco Plc dropped 16 percent, leading retail shares lower, after the U.K.’s largest supermarket chain said it was “disappointed” with holiday sales. Vestas Wind Systems A/S and Delhaize Group SA (DELB) tumbled. Royal Bank of Scotland Group Plc rose 5.6 percent after announcing job cuts. Sulzer AG (SUN), the world’s second-largest maker of pumps, added 5.1 percent after saying full-year orders increased 14 percent.
The Stoxx Europe 600 Index fell 0.2 percent to 249.50 at the close in London. The gauge had earlier advanced as much as 0.9 percent after Spain and Italy sold debt, raising their targeted amounts at lower yields.
The benchmark measure has still advanced 2 percent since the beginning of this year as economic reports around the world added to optimism the global economy can withstand the euro area’s debt crisis.
National benchmark indexes rose in 13 of Europe’s 18 western markets. France’s CAC 40 Index slipped 0.2 percent and the U.K.’s FTSE 100 Index fell 0.2 percent, while Germany’s DAX Index climbed 0.4 percent.
U.S. Economy
In the U.S., a report showed that more Americans than forecast filed applications for unemployment benefits last week, raising the possibility that a greater-than-usual increase in temporary holiday hiring boosted December payrolls.
Jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 375,000.
Sales at U.S. retailers in December rose less than forecast, restrained by cheaper fuel prices and holiday discounting that helped hold down the value of goods sold.
The 0.1 percent gain followed a 0.4 percent advance in November that was more than initially reported, Commerce Department figures showed today. Economists forecast a 0.3 percent December rise, according to the median estimate in a Bloomberg News survey. Purchases excluding automobiles fell 0.2 percent.
The U.S. economic expansion improved last month across most of the country, while hiring was limited and housing remained stagnant, the Fed said yesterday in the first edition of its Beige Book in 2012.
Debt Auctions
Spain auctioned 9.98 billion euros ($12.7 billion) of bonds maturing in 2015 and 2016, including a new three-year benchmark security, twice the maximum target of 5 billion euros set for the sale. The yield on the three-year notes was 3.384 percent, compared with 5.187 percent when the nation sold similar notes in December.
Italy sold 12 billion euros of Treasury bills, meeting its target, and its borrowing costs plunged. The Rome-based Treasury sold 8.5 billion euros one-year bills at a rate of 2.735 percent, down from 5.952 percent at the last auction.
“The bond auction was very good news,” said Bernard Delattre, president of Altimeo Asset Management in Paris. “It’s a sign of stabilization to see short-term interest rates decline in Italy.”
In the U.K., the Bank of England maintained its benchmark interest rate at 0.5 percent and its asset-purchase plan at 275 billion pounds ($422 billion). Both decisions matched economists’ estimates in a Bloomberg survey.
The European Central Bank kept the benchmark interest rate at a record low of 1 percent, as predicted by 47 of 53 economists surveyed by Bloomberg.
Retailers Retreat
Tesco tumbled 16 percent to 323.45 pence, the largest decline since at least 1988. The company said sales declined in the six weeks to Jan. 7 and that profit would be at the “low end of the current consensus range.” U.K. sales at stores open at least a year fell 2.3 percent, excluding fuel and value-added tax, during the period.
A gauge of retail shares in the Stoxx 600 slid 5.7 percent for the biggest drop since October 2008. J Sainsbury Plc (SBRY) lost 5.4 percent to 285.9 pence. William Morrison Supermarkets Plc, the smallest of the U.K.’s four main food retailers, retreated 6 percent to 285.9 pence. Home Retail Group Plc lost 4.9 percent to 83 pence.
Delhaize dropped 11 percent to 41.78 euros. The owner of Food Lion supermarkets plans to cut about 5,000 positions and expects a 2.4 percent drop in revenue as it closes stores in the U.S. and Europe. Costs related to the closures will hurt earnings by about 205 million euros starting in the first quarter, the Brussels-based company said.
Vestas lost 7.1 percent to 58.50 kroner. The biggest wind- turbine maker said it’s cutting 2,335 jobs worldwide and a further 1,600 posts are at risk in the U.S. this year as a tax credit expires.
RBS Job Cuts
RBS advanced 5.6 percent to 23 pence. Britain’s biggest government-owned lender will cut 3,500 jobs at its investment bank over the next three years as it exits its unprofitable cash equities and mergers advisory operations.
RBS said it will sell or close the units, along with its corporate broking and equity capital markets operations. The bank also said it cut a further 2,000 positions in the second half of last year.
UniCredit (UCG) SpA climbed 14 percent to 2.90 euros. The stock was raised to “buy” from “neutral” at Citigroup Inc., which said the stock would suit a high-risk investment strategy as it offers significant “upside potential.”
Sulzer, Petroplus
Sulzer jumped 5.1 percent to 112.50 Swiss francs. The company said 2011 orders rose 14 percent, or 8.4 percent nominally, to 3.6 billion francs ($3.8 billion).
Petroplus Holdings AG surged 16 percent to 1.39 francs, the most since November 2006. Europe’s largest independent refiner has reached a temporary agreement with lenders to renegotiate its debts and maintain operations at its Coryton and Ingolstadt refineries.
Solar shares gained after a government body said China plans to double solar capacity this year. The head of China’s National Energy Administration, Liu Tienan, said yesterday that the country will install 3 gigawatts in 2012.
Wacker Chemie AG (WCH), the second-biggest maker of solar-grade silicon, advanced 6 percent to 78 euros. Solarworld AG (SWV), Germany’s largest solar-panel maker, rose 10.4 percent to 3.96 euros.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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