European Stocks Fall, Trimming 11th Straight Monthly Gain

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Photographer: Chris Ratcliffe/Bloomberg

Stockbrokers speak on telephones as they monitor financial data on computer screens at a brokerage in London.

European stocks declined, paring an 11th straight month of gains, as a report showed business activity in the U.S. unexpectedly shrank this month.

Lonmin Plc tumbled 5.7 percent after shuttering a South African platinum furnace. Fiat Industrial SpA sank the most in 11 months after cutting its 2013 earnings target. UBS (UBSN) AG surged the most in six months as profit exceeded analysts’ projections. Deutsche Bank AG rallied the most since September after Germany’s largest lender announced plans to raise as much as $6.5 billion in capital.

The Stoxx Europe 600 Index fell 0.2 percent to 296.72 at the close of trading, after earlier climbing as much as 0.5 percent. The gauge has still risen 1 percent in April, completing the longest stretch of monthly gains since 1997 amid speculation central banks will add to stimulus efforts. The measure has climbed 6.1 percent this year.

“The U.S. has been slightly hindered by negative news flow that we think will correct itself in a few months,” Richard Scrope, who helps oversee about $160 million as fund manager at Oriel Asset Management LLP in London, said in a phone interview. “We’ll always see a short-term reaction in European markets to U.S. data. Within Europe, the data has been weak and unemployment is growing, which puts more pressure on the ECB to cut rates.”

Business activity in the U.S. shrank in April for the first time in more than three years. The MNI Chicago Report’s business barometer fell to 49, the lowest since September 2009, from 52.4 last month. A reading less than 50 signals contraction. The median forecast of 51 economists surveyed by Bloomberg was 52.5.

Fed Meeting

The U.S. Federal Reserve began a two-day policy meeting today. Policy makers may shift discussion away from when to reduce monetary stimulus, given data showing the economy is weakening, Pacific Investment Management Co.’s Mohamed A. El- Erian said yesterday.

The European Central Bank will cut its benchmark interest rate to a record low of 0.5 percent on May 2, according to 44 of 70 projections compiled by Bloomberg. One economist in the survey predicted a half-point reduction to 0.25 percent.

A report today showed the euro-area jobless rate rose to a record 12.1 percent in March.

National benchmark indexes climbed in 13 of the 18 western European markets today, including Sweden, which closed early for a public holiday. Germany’s DAX rose 0.5 percent, while the U.K.’s FTSE 100 declined 0.4 percent and France’s CAC 40 fell 0.3 percent.

Volume Gains

The volume of shares changing hands in Stoxx 600-listed companies was 11 percent greater than the 30-day average, according to data compiled by Bloomberg.

Lonmin retreated 5.7 percent to 269 pence, the biggest drop in two weeks. The world’s third-largest platinum producer suspended production at its Number Two furnace at Marikana in northwestern South Africa following an unspecified incident.

A gauge of commodity producers was the worst performer among 19 industry groups in the Stoxx 600. Randgold Resources Ltd. fell 4.1 percent to 5,060 pence and Anglo American Plc dropped 2.7 percent to 1,565 pence.

Fiat Industrial sank 5.3 percent to 8.57 euros, the most since May 23 last year. The truck and tractor maker cut earnings and sales targets for 2013 as a recession in Europe led to a first-quarter loss at its Iveco vehicle unit.

UBS Earnings

UBS rallied 5.7 percent to 16.60 Swiss francs as Switzerland’s largest bank reported first-quarter net income of 988 million francs ($1.06 billion) because of higher revenue at the investment bank and the wealth-management business. That beat the 412.3 million-franc average estimate of nine analysts surveyed by Bloomberg.

Deutsche Bank surged 6.1 percent to 34.91 euros. The bank announced plans to raise capital even after co-Chief Executive Officer Anshu Jain said a share sale wasn’t in investors’ interests three months ago. It also said first-quarter net income rose to 1.65 billion euros, exceeding the 1.21 billion- euro average estimate of six analysts surveyed by Bloomberg.

JPMorgan Chase & Co. upgraded Deutsche Bank to overweight, the equivalent of a buy rating, from neutral. Analysts at Royal Bank of Canada and Nomura Holdings Inc. also raised their recommendations.

BP Plc increased 2.1 percent to 466.4 pence, its largest gain in three months. Europe’s second-largest oil company reported earnings, adjusted for one-time items and inventory changes, of $4.2 billion pounds, beating the average estimate of $3.2 billion from 11 analysts in a Bloomberg survey.

Lloyds Gains

Lloyds Banking Group Plc added 1.6 percent to 54.33 pence. Britain’s biggest mortgage lender said pretax profit almost tripled in the first quarter to 1.48 billion pounds ($2.3 billion) as impairments for souring loans dropped by more than analysts had estimated. Provisions fell 40 percent to 1 billion pounds, the bank said in a statement.

Carphone Warehouse Group Plc soared 15 percent to 235 pence, the biggest gain since it split off TalkTalk Telecom Group Plc in 2010. Best Buy Co., the world’s largest consumer electronics retailer, agreed to sell its 50 percent stake in its European mobile-phone venture with Carphone Warehouse to the U.K. company for 500 million pounds.

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net; Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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

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