European Stocks Fall as Japanese Growth Wanes; Baer Drops

European stocks retreated, after 10 weeks of gains for the Stoxx Europe 600 Index, as slowing economic growth in Japan offset increased demand at an Italian debt auction.

Julius Baer Group Ltd. lost 7.4 percent after agreeing to buy Bank of America Corp.’s Merrill Lynch wealth management business outside the U.S. Petrofac (PFC) Ltd. fell 5.2 percent as the oil and gas engineer said profit growth will slow. Unicredit SpA and Intesa (ISP) Sanpaolo SpA advanced after Italy sold 8 billion euros ($9.9 billion) of debt.

The Stoxx 600 fell 0.4 percent to 268.72 at the close of trade after climbing as much as 0.1 percent earlier. The volume of shares changing hands in companies listed on the gauge was 40 percent below the average of the last 30 days, data compiled by Bloomberg show.

“We remain cautious on European equities in the short term,” Yu-chieh Chiang and Edmund Shing, strategists at Barclays Plc in London, wrote in a report to clients. “The rally needs something more to extend. Macro lead indicators have not turned around decisively.”

National benchmark indexes fell in 14 of the 18 western European markets today. The U.K.’s FTSE 100 dropped 0.3 percent, while Germany’s DAX declined 0.5 percent and France’s CAC 40 retreated 0.3 percent. Italy’s FTSE MIB Index reversed earlier gains, losing 0.1 percent.

Japanese Growth

Japanese data today showed a reconstruction-fueled rebound in the country’s economy waned in the second quarter as consumer spending growth almost stalled and export gains diminished.

Gross domestic product advanced an annualized 1.4 percent in the three months through June, less than the median economist estimate of 2.3 percent in a Bloomberg News survey and down from 5.5 percent the previous quarter, according to a Cabinet Office report. Unadjusted for prices, GDP contracted at a 0.6 percent annual pace.

The Stoxx 600 (SXXP) fell on Aug. 10 after a collapse in Chinese export growth added to concern the world’s second-largest economy is also slowing.

The European benchmark gauge has still climbed for 10 weeks, the longest stretch of gains since January 2006, boosted by speculation policy makers will do more to stimulate growth.

Hedge funds that base investment decisions on economic trends are unwinding bets against European stocks at the fastest pace in three years, speculating policy makers will step up the fight against the debt crisis.

The degree by which macro funds are trailing the Euro Stoxx 50 Index (SX5E) is narrowing at the fastest rate since 2009, a sign managers are covering short sales by buying shares, according to data compiled by Bloomberg and JPMorgan Chase & Co. The proportion of shares on loan in the Stoxx Europe 600 Index, an indication of short interest, has fallen to 2.9 percent from 3.4 percent in May, data from London-based Markit show.

Julius Baer

Julius Baer (BAER) dropped 7.4 percent to 32.80 Swiss francs after the money manager agreed to pay about 860 million francs ($880 million) for Bank of America’s Merrill Lynch non-U.S. wealth management business. The company plans to raise 750 million francs through a rights offering to help fund the deal.

Petrofac dropped 5.2 percent to 1,486 pence for a fourth- day of declines after the U.K. oil and gas engineer said profit growth in the second half will slow as projects are delayed. The company reported first-half net profit of $325 million, beating the average analyst estimate of $314 million.

Nokia Falls

Nokia Oyj (NOK1V) declined 6 percent to 2.18 euros, paring some of last week’s 18 percent advance. Danske Bank A/S analyst Ilkka Rauvol said the smartphone maker may soon offer new shares at a “signficant” discount, citing management buying stock, the company’s focus on cash generation and increasing costs for restructuring its handset operations.

Solarworld AG (SWV) sank 12 percent to 1.16 euros after Germany’s biggest panel-maker said it sees lower full-year revenue in 2012 from a year earlier. The company reported a second-quarter net loss of 161 million euros and sales of 169.6 million euros for the period.

Italian lenders paced advancing shares after the country sold 8 billion euros worth of one-year bills, meeting its target. The Rome-based Treasury sold the bills at 2.767 percent, up from 2.697 percent at the last sale of similar-maturity debt on July 12. Investors bid 1.69 times the amount of bills offered, up from 1.55 times last month.

Unicredit (UCG), Italy’s largest bank, rose 1 percent to 2.94 euros. Intesa, the country’s second-biggest, gained 0.8 percent to 1.10 euros.

Telenet Group Holding NV (TNET) rallied 2.1 percent to 35.30 euros after the Belgian cable operator announced plans to buy back as much as 18.2 percent of its stock for 35 euros apiece.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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