European stocks fell for a second day as companies from L’Oreal SA to Bouygues (EN) SA retreated after reporting earnings and German Chancellor Angela Merkel clashed with Italian Prime Minister Mario Monti over whether to give the euro area’s permanent bailout fund a bank license.
L’Oreal dropped the most in 2 1/2 years after the world’s largest cosmetics maker reported profit margins that missed estimates. Bouygues, the French building, television and telecommunications company, tumbled 9 percent after trimming the earnings forecast for its phone business. Banca Monte dei Paschi di Siena SpA plunged 8 percent after posting a loss.
The Stoxx Europe 600 Index (SXXP) slipped 0.1 percent to 267.01 at the close of trading, having swung between gains and losses at least 12 times. The measure has still risen 14 percent from this year’s low on June 4 as European Central Bank President Mario Draghi pledged to do whatever it takes to preserve the euro and the region’s political leaders agreed to ease repayment terms on loans to Spain’s banks.
“Investors want Draghi to put the money where his mouth is,” said Witold Bahrke, a senior strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “The European Central Bank seems to have developed a strategy of issuing a policy statement and letting it linger for a long time before backing it up by action. People in the market are getting annoyed with that.”
The volume of shares changing hands in companies listed on the Stoxx 600 was 23 percent lower than the average of the last 30 days, data compiled by Bloomberg showed, as investors awaited this week’s speech from Federal Reserve Chairman Ben S. Bernanke in Jackson Hole, Wyoming.
“Jackson Hole is still the big event of the week,” said Jakup Petur Baerentsen, a chief equity adviser at Nordea Private Bank in Copenhagen. “Any market moves before that will only be small, though they could be triggered by political events.”
The Stoxx 600 pared an earlier decline of as much as 0.5 percent after Monti told a joint press conference with Merkel that European treaties can be modified to deal with the debt crisis and a banking license for the European Stability Mechanism should be an option. Merkel said she agrees with Draghi that a bank license for the ESM “is not compatible” with the European treaties.
Bernanke will deliver his annual speech at the Fed’s Jackson Hole symposium on Aug. 31. His address in 2010 preceded a second round of bond purchasing, or quantitative easing, to help support the economic recovery.
Draghi canceled his trip to Jackson Hole yesterday, reducing speculation ECB policy makers will unveil new measures to support the economy before their Sept. 6 meeting. Draghi announced on Aug. 2 that the central bank may resume bond purchases if distressed governments ask for aid from the region’s bailout funds.
National benchmark indexes retreated in 11 of the 18 western-European markets today. The U.K.’s FTSE 100 Index slid 0.6 percent and France’s CAC 40 Index declined 0.5 percent. Germany’s DAX Index rose 0.1 percent.
In the U.S., the Commerce Department’s first revision to second-quarter gross domestic product showed a gain of 1.7 percent compared with an initially reported 1.5 percent increase, matching the median forecast in a Bloomberg survey of economists. In the first three months of the year, the economy expanded at a 2 percent rate.
Data from the National Association of Realtors showed U.S. pending home sales rose 2.4 percent in July from June, when they declined 1.4 percent. That was higher than the 1 percent increase forecast in a Bloomberg survey of economists. The Fed will release its Beige Book survey of economic conditions after the close of European trading today.
L’Oreal (OR) lost 4.4 percent to 96.58 euros, the biggest drop since February 2010, as gross profit as a percentage of sales narrowed to 71 percent in the six months ended June 30 from 71.5 percent a year earlier. That was less than the 71.9 percent average estimate of four analysts compiled by Bloomberg.
L’Oreal attributed the decline to the weakening of the euro, the consolidation of Clarisonic, a maker of sonic skincare devices that it agreed to buy at the end of 2011, and an increase in promotional offers.
Bouygues sank 9 percent to 19.95 euros, the largest decline since October 2008. The French building, television and telecommunications company trimmed its 2012 earnings forecast for its phone business as it cut prices and lost customers to new entrant Iliad SA.
Monte Paschi (BMPS) retreated 8 percent to 22.4 euro cents in Milan, the biggest decline since Aug. 2. Italy’s third-largest bank posted a 1.67 billion-euro second-quarter loss after a goodwill writedown.
Raiffeisen Bank International AG (RBI), eastern Europe’s second- biggest lender, slid 4.3 percent to 26.69 euros after net income plummeted 54 percent in the second quarter as lending revenue shrank and bad debt writedowns increased.
Vestas Wind Systems A/S (VWS) dropped 5 percent to 38.18 kroner after the world’s biggest wind-turbine maker was relegated from the benchmark Stoxx 600, effective Sept. 24.
Novozymes A/S (NZYMB), the world’s biggest maker of enzymes, rose 3 percent to 165 kroner after Goldman Sachs Group Inc. upgraded the stock to buy from neutral.
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