Stocks Drop in Europe as China Cuts Forecast for Growth; Rio Tinto Falls
European (SXXP) stocks dropped, snapping two days of gains, as China cut its forecast for economic growth this year and data showed manufacturing and services in the euro area shrank more than estimated.
Rio Tinto Group led mining shares lower as copper slid. Salzgitter AG (SZG) sank 5.4 percent amid uncertainty over the steelmaker’s outlook. BP Plc (BP/) advanced 1.6 percent after reaching a $7.8 billion settlement with businesses and individuals harmed by the Gulf of Mexico oil spill in 2010.
The Stoxx Europe 600 Index retreated 0.6 percent to 265.56 at the close, paring last week’s 0.9 percent advance. The benchmark measure earlier slid as much as 1 percent. The Stoxx 600 has rallied 8.6 percent this year as U.S. economic reports beat estimates and investors speculated that policy makers will contain the euro region’s sovereign-debt crisis.
“The market is really taking more of a pause for breath after the strong rally that we have seen,” said Edmund Shing, an equity strategist at Barclays Capital in London. “People are actually a little bit less pessimistic on the economic front than late last year, but clearly we would like to see more positive macro data going forward. We don’t expect growth in Europe this year.”
China reduced its growth target to 7.5 percent this year, the lowest goal since 2004, according to a transcript of Premier Wen Jiabao’s address to the National People’s Congress. The government will also aim for inflation of about 4 percent this year, unchanged from its goal in 2011.
European Services, Manufacturing
Stocks extended declines after euro-area services and manufacturing output shrank in February more than economists had estimated as the region’s economy struggled to rebound from a contraction in the fourth quarter of last year.
A euro-area composite index based on a survey of purchasing managers in both industries dropped to 49.3 from 50.4 in January, London-based Markit Economics said today. That was below an initial figure of 49.7 published on Feb. 22. A reading of less than 50 means the measure contracted.
National benchmark indexes declined in every western- European (SXXP) market except Switzerland and Iceland today. France’s CAC 40 Index (CAC) slipped 0.4 percent, while the U.K.’s FTSE 100 Index fell 0.6 percent. Germany’s DAX Index (DAX) lost 0.8 percent.
Greece’s Debt Swap
Investors are waiting to see how many of Greece’s private creditors agree to write down their sovereign-debt holdings by the euro area’s March 8 deadline. If the proposal wins their support, Greece will reduce its borrowings by 106 billion euros ($140 billion), lowering its debt to 120.5 percent of gross domestic product by 2020.
Greece’s government has set a 75 percent participation rate as the threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility.
Germany’s DSW investor protection group today advised private-sector bondholders to reject the Greek bond offer.
Rio Tinto dropped 3.9 percent to 3,422 pence, BHP Billiton Ltd. fell 2.9 percent to 1,971 pence and Vedanta Resources Plc slid 3.7 percent to 1,400 pence. Copper declined for a second day in London after China cut its target for economic growth.
Rio Tinto also declined as the world’s third-largest mining company said it will review its Bell Bay aluminum smelter in Australia because of rising costs and falling prices for the lightweight metal.
Salzgitter, Kloeckner Drop
Salzgitter sank 5.4 percent to 42.88 euros after the German steelmaker said it was “impossible” to provide an earnings forecast because the euro area’s sovereign-debt crisis remains a major risk.
“Delivering a repeat of the previous year’s results will be challenging,” the company said today. “The start to the new year appears to be marked by dampening effects on the course of business in the steel and tubes divisions.”
Amlin Plc slid 4.4 percent to 336 pence after the biggest Lloyd’s of London insurer by market value posted a wider-than- estimated full-year loss of 149.9 million pounds ($238 million) after the worst year for natural catastrophes on record. Analysts had predicted a loss of 146 million pounds.
BP, Misys Advance
BP climbed 1.6 percent to 504.6 pence, limiting the Stoxx 600 (SXXP)’s slide, after Europe’s second-largest oil producer reached a deal with private plaintiffs -- the businesses and individuals harmed by the 2010 oil spill.
The sum was lower than the $14 billion that had been discussed, according to people familiar with the talks. The settlement doesn’t resolve federal and state government claims for environmental damage.
The company said it has formed an independent committee of board directors to consider the offers and remains in talks with Temenos Group AG and Vista Equity Partners. Temenos slipped 3.9 percent to 17.1 Swiss francs.
Elekta AB (EKTAB) surged 8.7 percent to 332.90 kronor for the biggest advance on the Stoxx 600 (SXXP). The world’s second-largest maker of radiation-surgery equipment said its order intake jumped 45 percent in the three months to Jan. 31 after it acquired Nucletron NV, a company that uses radiation to fight cancer.
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