European stocks fell to a three- month low as manufacturing contracted in the euro area and China and as Dutch Prime Minister Mark Rutte offered to resign after struggling to clinch an austerity deal.
Renault SA (RNO) and ArcelorMittal (MT) led a selloff in automakers and commodity companies. ING Groep NV (INGA) and Aegon NV (AGN) tumbled more than 6 percent amid concern the Netherlands may lose its AAA rating. Royal Philips Electronics NV rallied 3.3 percent after earnings beat analysts’ estimates.
The benchmark Stoxx Europe 600 Index dropped 2.3 percent to 251.75 in London, the lowest since Jan. 16. The gauge last week snapped a four-week losing streak after the International Monetary Fund raised its global growth forecast and U.S. company earnings beat estimates.
“There is every reason for this market to correct today,” said Patrick Moonen, a senior strategist at ING Investment Management in The Hague, which manages $163 billion. “The political environment in Europe has not improved over the weekend and we’ve had some weaker-than-expected macro data that is clearly disappointing. The overall market sentiment has turned bearish, but I am not at all concerned that this is more than a correction.”
Euro-area services and manufacturing contracted more than estimated in April, to a five-month low. A composite index based on a survey of purchasing managers in both industries fell to 47.4 from 49.1 in March, London-based Markit Economics said in an initial estimate. Economists had forecast an increase to 49.3, according to a Bloomberg News survey. A reading below 50 indicates contraction.
Chinese manufacturing also shrank for a sixth month in April, according to a survey of companies. The 49.1 preliminary reading of the purchasing managers’ index from HSBC Holdings Plc and Markit today compared with a final 48.3 the previous month.
In the Netherlands, Rutte offered his Cabinet’s resignation after one of the parties in his minority coalition withdrew support. Queen Beatrix will consider the resignation, the government’s information service said.
National benchmark indexes dropped in all of 18 western European markets except Iceland. The Netherlands’ AEX declined 2.6 percent to the lowest level this year. France’s CAC 40 lost 2.8 percent, the U.K.’s FTSE 100 slid 1.9 percent and Germany’s DAX retreated 3.4 percent. Sweden’s OMX tumbled 4.6 percent, the biggest drop since September.
Elsewhere, French President Nicolas Sarkozy became the first incumbent since 1958 not to win the first round of the nation’s election.
Socialist Francois Hollande won 28.6 percent of the vote against 27.2 percent for Sarkozy. The anti-immigrant Marine Le Pen got 17.9 percent, a record for her party that surpassed the predictions of all pollsters. The second round of elections takes place on May 6.
“One potential change of government in the euro zone is bad enough,” said Chris Beauchamp, a markets analyst at IG Index in London. “With the Dutch government falling apart as well, investors have been well and truly spooked,”
A gauge of auto-industry companies was the second-worst performer among the 19 industry groups in the Stoxx 600, tumbling 3.7 percent. Daimler AG (DAI) lost 4.2 percent to 39.50 euros, Bayerische Motoren Werke AG (BMW), which today said it expects the pace of sales growth in China to ease, fell 4.1 percent to 67 euros and Renault SA sank 5.1 percent to 33.70 euros.
Commodity Shares Fall
Basic-resource companies also retreated. ArcelorMittal, the world’s largest steelmaker, dropped 5.3 percent to 12.25 euros. Vedanta Resources Plc (VED) declined 5.7 percent to 1,167 pence and Antofagasta Plc (ANTO) slid 3.2 percent to 1,140 pence.
In Madrid, construction shares tumbled, led by Actividades de Construction y Servicios S.A., the biggest Spanish builder, which lost 10 percent to 13.50 euros. Fomento de Construcciones y Contratas SA (FCC) dropped 7.2 percent to 12.15 euros and Sacyr Vallehermoso SA (SYV) plummeted 12 percent to 1.40 euros.
“People are running away from anything that is Spanish and leveraged,” said Luis Benguerel, a trader at Interbrokers Espanola in Barcelona. “Banks are being dumped because they have the credit and builders being sold because they took money to build up their business and cannot pay back now.”
Ericsson AB, the biggest maker of wireless network equipment, declined 4.4 percent to 61.60 kronor in Stockholm, while STMicroelectronics, Europe’s largest semiconductor maker, declined 14 percent to 4.31 euros in Paris. The chipmaking joint venture of the two companies plans to cut 1,700 jobs and reduce costs by $320 million a year by the end of 2013.
ING, Aegon Retreat
ING, the largest Dutch financial-services company, dropped 6.1 percent to 5.23 euros as Dutch 10-year bonds fell, driving the yield difference to German bunds to a three-year high. Aegon, owner of U.S. insurer Transamerica Corp., plunged 6.7 percent to 3.40 euros and SNS Reaal NV (SR), a Dutch lender and insurer, plunged 9.1 percent to 1.40 euros.
“The risk has heightened the Netherlands may be downgraded and lose its AAA rating,” Nick Kounis, head of macro research at ABN Amro Group NV in Amsterdam, said in a telephone interview yesterday. “I don’t see a majority in parliament to bring the deficit to 3 percent. So hopefully the politicians will get their act together as the country has a long history of fiscal prudence,” Kounis said.
Deutsche Bank Charge
Deutsche Bank AG (DBK) paced a selloff in European banks, falling 4.4 percent to 32.98 euros in Frankfurt. Germany’s largest lender will probably book an additional charge of as much as 400 million euros ($528 million) tied to the sale of Actavis Group hf, according to people familiar with the transaction.
Philips limited losses in Amsterdam, rallying 3.3 percent to 14.82 euros, after the world’s biggest light-bulb maker reported profit that beat analysts’ estimates after cutting costs and selling assets.
Cable & Wireless Worldwide Plc (CW/) jumped 12 percent to 35.9 pence after Vodafone Group Plc (VOD) agreed to buy the U.K. company for 1.04 billion pounds ($1.7 billion). The world’s largest wireless operator offered 38 pence a share after India’s Tata Communications Ltd. last week failed to agree on a price.
Danone (BN) gained 1.3 percent to 53.13 euros after Nestle SA (NESN) agreed to buy Pfizer Inc.’s baby-food unit for $11.9 billion, edging out the French company in a contest for a business that gets most of its sales in emerging markets.
Nestle’s offer beat a bid of about $11 billion from Danone, according to a person with knowledge of the matter. Nestle gained 0.6 percent to 55.50 euros in Zurich, adjusted for lost dividend rights.
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