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European Stocks Little Changed; Mining Shares Lead Drop

European (SXXP) stocks were little changed, after the Stoxx Europe 600 reached its highest level in almost five months yesterday, as a worse-than-expected manufacturing report for the New York area revived hopes the Federal Reserve will act to stimulate the economy.

A gauge of European mining companies slumped, with Rio Tinto Plc dropping 3.4 percent. Eurasian Natural Resources Corp., a Kazakh metal producer, slid the most in 11 months. Standard Chartered Plc (STAN) gained 4.1 percent after the company settled a New York money laundering probe for $340 million.

The Stoxx 600 lost 0.1 percent to 270.35 at the close of trading. European stocks rallied for the last 10 weeks amid better-than-expected company earnings and speculation policy makers from will do more to stimulate the economy. The Stoxx 600 climbed yesterday as a report showed German growth slowed less than forecast.

“The surprisingly weak Empire State index is disappointing and shows that the mood in the U.S. industry remains tense,” Ulrich Wortberg, an analyst at Helaba Landesbank Hessen- Thueringen, wrote in an e-mail. “With these numbers, the QE3 topic could get a little bit more life again,” he said, referring to a potential third program of stimulus from the U.S. Federal Reserve.

The volume of shares changing hands in companies listed on the Stoxx 600 was 53 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. Markets in Italy, Luxembourg, Austria and Greece were closed today.

National Benchmarks

National benchmark indexes declined in eight of the western-European markets that were open today. France’s CAC 40 retreated less than 0.1 percent, while the U.K.’s FTSE 100 fell 0.5 percent. Germany’s DAX slipped 0.4 percent.

In the U.S., a report showed that manufacturing in the New York area unexpectedly contracted in August for the first time since October. The Federal Reserve Bank of New York’s general economic index fell to minus 5.9 this month from 7.4 in July. The median estimate in a survey of Bloomberg economists was 7.0. Readings less than zero signal contraction in the so-called Empire State Index, which covers New York, northern New Jersey and southern Connecticut.

A separate report showed industrial production in the U.S. increased in July, propelled by a pickup in motor vehicle output and a rebound in utility use during the hottest month on record.

The 0.6 percent increase last month at factories, mines and utilities followed a revised 0.1 percent gain in June that was smaller than previously reported, Federal Reserve data showed today in Washington. Economists forecast a 0.5 percent rise, according to the Bloomberg survey median.

U.K. Jobless

U.K. jobless claims unexpectedly fell in July as the Olympic Games created jobs in London. Jobless-benefit claims fell 5,900 to 1.59 million, the Office for National Statistics said today. The median forecast of 29 economists in a Bloomberg News Survey was for a gain of 6,000.

Spain’s government is considering a request for a sovereign bailout, European Economic and Monetary Affairs Commissioner Olli Rehn signaled.

“The Spanish government has an open mind on this issue, but no decision has been made,” Rehn said in a Bloomberg Television interview in New York yesterday. “We stand ready to act if there is a request.”

His remarks came after Prime Minister Mariano Rajoy said he would ask the European Central Bank to buy Spanish bonds “if it seems reasonable.”

Miners Decline

A gauge of European mining companies posted the worst performance of the 19 industry groups in the Stoxx 600.

China’s “golden years” are gone as economic growth at the world’s second-biggest economy slows, said an official at Vale SA (VALE3), the top iron-ore producer.

Iron-ore prices dropped to the lowest since Dec. 2009 yesterday on slower growth in China, the biggest user of the raw material, and a weaker outlook for the global economy.

Rio Tinto lost 3.4 percent to 3,038 pence, contributing the most to the Stoxx 600’s decline, while BHP Billiton Plc fell 2.3 percent to 1,936.5 pence.

Eurasian Natural Resources (ENRC) slid 8.5 percent to 379.6 pence, its biggest decline since Sept. 22. First-half sales of $3.25 billion missed the average $3.4 billion analyst estimate, and the company said the market will remain volatile with uncertain pricing. Net income for the period fell 60 percent to $463 million.

Cigarette Ruling

Imperial Tobacco Group Plc (IMT) lost 1.7 percent to 2,489 pence. Australia will become the first country to require cigarettes to be sold in uniform packages after its top court rejected a challenge from tobacco companies, setting a precedent for other nations to follow.

The High Court of Australia dismissed claims by companies, including Imperial Tobacco, that the government illegally seized their intellectual property by barring the display of trademarks on packs.

Vodafone Group Plc (VOD) fell 1 percent to 188.75 pence after Bank of America Corp. cut the world’s second-biggest mobile- phone company to neutral, the equivalent of hold, from buy.

Royal KPN NV (KPN), the Dutch phone company partly controlled by Carlos Slim’s America Movil SAB, lost 1.3 percent to 6.57 euros after it halted the sale of its Belgian mobile-phone unit Base, saying the non-binding offers it received were “unsatisfactory.”

The bids for the mobile-phone unit reflected the “current difficult financial-market conditions and didn’t take Base’s strong position and outlook into account,” the Hague-based KPN said today in a statement.

FirstGroup Slides

FirstGroup Plc (FGP) slumped 6.1 percent to 243.2 pence. The company won a U.K. Department for Transport contract to operate the new InterCity West Coast rail franchise, which links London with Scotland, until 2026. Shares had gained 7.6 percent in the last five sessions after reports that it may win the contract.

Standard Chartered increased 4.1 percent to 1,426.5 pence as it settled a New York money-laundering probe for $340 million a day before the bank was to appear at a hearing to defend its right to continue operating in the state. It still faces federal investigations over allegations it helped Iran funnel money through the U.S.

Nokia Oyj (NOK1V) rallied 3.4 percent to 2.08 euros. Reuters reported the company will keep Windows as its smartphone platform, citing Chief Executive Officer Stephen Elop. Shares pared gains of as much as 8.1 percent after Standard & Poor’s cut the company’s debt, already at junk status, by two additional steps, as the unprofitable mobile-phone maker loses market share and burns cash.

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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