European stocks declined the most in two weeks as investors bet that the rally in the Stoxx Europe 600 Index (SXXP) to a 15-month high overshot the economic outlook and prospects for corporate earnings.
Akzo Nobel NV (AKZA), the world’s largest paintmaker, tumbled the most in one year after saying Chief Executive Officer Ton Beuchner will go on sick leave. Aviva Plc (AV/) slid 4 percent after analysts downgraded the stock. PSA Peugeot Citroen and Fiat SpA led a gauge of European automakers lower after a report showed car sales slumped in August. Diageo Plc gained 2.1 percent after Morgan Stanley recommended the shares.
The Stoxx Europe 600 Index lost 0.4 percent to 273.8 at the close of trading, the sharpest decrease since Sept. 4. The equity benchmark has still climbed 17 percent from this year’s low on on June 4 as European Central Bank policy makers approved an unlimited bond-buying program and the Federal Reserve unveiled a third round of asset purchases.
“While central banks solved the liquidity problem, the fundamental issues haven’t been solved as Southern Europe remains uncompetitive.”said Jeppe Christiansen, the chief executive officer of Copenhagen-based Maj Invest A/S, which manages $7.4 billion.
The Stoxx 600 rallied during 13 of the 15 weeks through Sept. 14, reaching the highest close since June 1 last year. This sent the measure’s price multiple to 12.3 times the estimated earnings of its member companies, the highest since December 2010.
Spain sold 4.6 billion euros ($6 billion) of bills today, just above the maximum target. The country’s borrowing costs fell at the first auction since the ECB proposed buying the debt of cash-strapped nations.
Spanish 10-year bonds rose for the first time in four days after the debt sale, signaling that the indebted nation can continue to borrow from the market even as it contemplates whether to seek an international bailout.
ECB Governing Council member Luc Coene said investors may begin to ask for higher yields if Spain delays a request for external aid.
If “markets see that Spain will not” ask for assistance, “then it will not last long before spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program,” Coene said at a panel discussion in London yesterday.
The volume of shares changing hands on Stoxx 600 companies was 22 percent more than the average of the last 30 days, according to data compiled by Bloomberg.
German investor confidence rose for the first time in five months in September, a report showed today.
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to minus 18.2 from minus 25.5 in August. Economists forecast a gain to minus 20, according to the median of 41 estimates in a Bloomberg News survey.
“Investors are now taking a breather to see what the next driver will be,” said Henrik Henriksen, the chief strategist at PFA Pension A/S in Copenhagen, where he helps oversee $55 billion. “If investors keep buying more risky assets, stock markets will be able to rise on their own. They will otherwise be helped by Spain asking for a bailout.”
Akzo Nobel dropped 5.5 percent to 46.16 euros, the biggest decline since September 2011. Buechner will take leave for one month to recuperate from fatigue on the advice of his doctor, Amsterdam-based Akzo said. He plans to return in the first half of October and Chief Financial Officer Keith Nichols will be the point-person in the interim period.
Aviva lost 4 percent to 344.9 pence. Deutsche Bank AG downgraded the stock to hold from buy and Bank of America Corp. cut its rating to underperform, the equivalent of sell, from neutral.
Peugeot retreated 4.3 percent to 6.78 euros, as a gauge of European carmakers was the worst-performing industry group on the Stoxx 600. Car registrations in the region fell 8.5 percent to 722,483 vehicles in August from 789,458 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said. Sales this year through August decreased 6.6 percent to 8.59 million cars.
Arkema SA (AKE) dropped 4.4 percent to 71.69 euros even as the French maker of industrial chemicals said it will increase its dividend payout and raised its profitability target for 2016 as it pursues acquisitions and develops new products.
Arkema’s dividend “will already show a significant step-up in 2012,” and it “targets beyond a 30 percent payout ratio on adjusted net income,” the company said.
Volex Plc (VLX) plunged 27 percent to 187.5 pence, the biggest decrease since January 2008. The company said operating profit for the year ending March 31 will be broadly in line with the last financial year due to a recent unexpected drop in demand from its largest customer in the consumer sector.
A gauge of commodity stocks fell for a second day as copper led metals lower in London. BHP Billiton Ltd. (BHP), the world’s largest mining group, lost 1.4 percent to 1,996.5 pence, while Rio Tinto Group, the third-biggest, decreased 0.7 percent to 3,193.5 pence.
Diageo gained 2.1 percent to 1,718 pence after Morgan Stanley named the stock as one of the four “European staples” to own over the next six months.
A gauge of food and beverage stocks was the second-best performing group on the Stoxx 600. Nestle SA (NESN), the world’s largest food company, gained 0.8 percent to 59 Swiss francs, while Anheuser-Busch InBev NV (ABI) advanced 1.2 percent to 65.83 euros.
The ASE Index climbed 2.9 percent after Greek Finance Minister Yannis Stournaras said his country’s budget deficit will be in line this year with the 14.8 billion-euro target promised to international lenders. National Bank of Greece SA jumped 7.3 percent to 2.05 euros, while Alpha Bank AE rallied 7.7 percent to 1.68 euros.
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