European Stocks Retreat as U.S. GDP Misses Estimates; BP Falls
European stocks dropped from a five- month high as a report showed that the U.S. economy grew at a slower pace in the fourth quarter than economists had predicted.
BP Plc (BP/), Europe’s second-biggest oil company, declined 2.6 percent after a judge ruled it can’t collect part of the cleanup costs for its Gulf of Mexico spill from Transocean Ltd. (RIG) BNP Paribas SA fell 3.3 percent, making the biggest contribution to the decline in a gauge of European banks, after JPMorgan Chase & Co. recommended selling the shares.
The Stoxx Europe 600 Index tumbled 1 percent to 255.4 at the close of trading, the biggest drop since Dec. 14. The benchmark index slipped 0.2 percent this week, snapping a five- week rally, as Greece’s government continued to discuss a debt swap with its private bondholders. The gauge has still advanced 4.4 percent in 2012, entering a bull market yesterday for the second time in less than a year.
“The selling intensified after lunch, when U.S. GDP figures failed to live up to expectations,” said Chris Beauchamp, a market analyst at IG Index in London. The data “was the catalyst for a general weakening of stock markets.”
The Stoxx 600 rose 1.1 percent yesterday, extending the gauge’s rally from its Sept. 22 low to 20 percent. When an index gains 20 percent from its most recent low, analysts say it has entered a bull market. European equities have climbed since September amid reports that indicated the U.S. economy is recovering and speculation that the euro area will contain its sovereign-debt crisis.
U.S. GDP Growth
A U.S. Commerce Department report today showed that the world’s largest economy expanded in the fourth quarter at a slower pace than economists had forecast. Gross domestic product, the value of all goods and services produced, grew at a 2.8 percent annual pace. That fell short of the 3 percent average prediction of 79 economists surveyed by Bloomberg News.
“This means that investors will be very careful with the next U.S. data publications,” said John Plassard, director at Louis Capital Markets SA in Geneva. “Momentum is weaker than expected and should make some investors doubtful.”
A separate report showed that consumer sentiment was the strongest in 11 months in January, bolstered by job gains. The Thomson Reuters/University of Michigan final index of confidence for the month climbed to 75 from 69.9 at the end of December. That beat the median estimate from a survey of 62 economists by Bloomberg News.
National benchmark indexes fell in every western European market except Iceland today. The U.K.’s FTSE 100 Index slid 1.1 percent, France’s CAC 40 Index declined 1.3 percent and Germany’s DAX Index lost 0.4 percent.
Greece’s Debt Swap
European Union Economic and Monetary Affairs Commissioner Olli Rehn said Greece’s government will probably reach an agreement on a debt swap with its private creditors this month.
“The next three days will be very crucial for the future,” Rehn said at the World Economic Forum in Davos, Switzerland, today. “We’re just about to close a deal on private-sector involvement between the Greek government and the private-sector community, preferably still in January rather than February.”
The Institute of International Finance said that it made “some progress” at a meeting last night in Athens between managing director Charles Dallara and Greek Prime Minister Lucas Papademos. Talks continued today.
Greece and its creditors have haggled over how to reduce the country’s borrowings three months after private bondholders agreed to a 50 percent cut to the face value of more than 200 billion euros ($262 billion) of debt by voluntarily swapping bonds for new securities.
BP Shares Decline
BP retreated 2.6 percent to 464.55 pence for the biggest drag on the Stoxx 600. A judge ruled that the U.K. oil company can’t collect from Transocean part of the $40 billion in cleanup costs and economic losses caused by the 2010 Gulf of Mexico spill. BP sued Transocean in April to recover a share of its damages and costs. The blowout of the Macondo well led to the world’s largest accidental oil spill.
Transocean advanced 0.9 percent to 43.83 Swiss francs.
BNP Paribas retreated 3.3 percent to 34.64 euros after JPMorgan downgraded France’s biggest bank to “neutral” from “overweight.” Credit Agricole SA (ACA) dropped 1.6 percent to 4.94 euros.
Waertsilae Oyj, the world’s largest maker of ship motors and power plants, fell 5.3 percent to 25.54 euros after reporting fourth-quarter sales of 1.24 billion euros, missing the average analyst estimate of 1.38 billion euros. The company posted operating profit of 145 million euros, falling short of the average projection of 151 million euros.
To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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