European stocks fell to a four-week low, paring a 12th consecutive month of gains for the Stoxx Europe 600 Index, as better-than-forecast data on U.S. business activity and consumer confidence bolstered speculation the Federal Reserve will pare its bond purchases.
Roche Holding AG retreated for a fifth day after its flu medicine failed to show additional benefits when given in a larger dose. Telecom Italia SpA (TIT) sank 5.8 percent after UBS AG said the carrier’s plan to spin off its network unit may be a lengthy process. PostNL NV climbed to a four-month high after the Dutch mail-service company raised its profit forecast.
The Stoxx 600 declined 0.9 percent to 300.88 at the close of trading, the lowest since May 2. The benchmark gauge posted a 0.8 percent drop this week as investors weighed the likelihood of the Fed taking steps to reduce monetary stimulus. It has still advanced 1.4 percent in May, completing the longest streak of monthly gains since July 1997.
“We’re pausing for breath a bit,” said Andrea Williams, who helps oversee $76 billion as head of European equities at Royal London Asset Management. “You can’t have a straight line up. There seems to be this fear of the Fed ending their easing, which has spooked the markets. The market can carry on grinding higher; it’s still cheap.”
In the U.S., the MNI Chicago Report’s business barometer, a gauge of business activity, rose to 58.7 in May from 49 in April. Economists surveyed by Bloomberg had forecast a reading of 50, the dividing line between expansion and contraction.
In a separate release, the Thomson Reuters/University of Michigan’s final index of U.S. consumer sentiment climbed this month to 84.5. That was the highest level since July 2007 and greater than the median projection in a Bloomberg survey.
The better-than-forecast American data boosted speculation the Fed will taper bond purchases and helped push the yield on 10-year Treasuries up 5 basis points to 2.16 percent today. The yield has climbed 48 basis points in May, the biggest monthly gain since December 2010.
In China, a report tomorrow may show manufacturing stagnated in May. A purchasing managers’ index compiled by the National Bureau of Statistics and China Federation of Logistics and Purchasing fell to 50 from 50.6 in April, according to the median forecast of 30 economists in a Bloomberg survey.
“It’s the end of the month, so we are seeing huge bouts of volatility,” Ishaq Siddiqi, a market strategist at ETX Capital in London, wrote in e-mailed comments. “Chatter in the market that China’s PMIs for May will come in weaker than expected tomorrow also weighs on European share markets.”
National benchmark indexes fell in all of the 18 western European markets, except Greece. The U.K.’s FTSE 100 (UKX) slid 1.1 percent and France’s CAC 40 retreated 1.2 percent, while Germany’s DAX lost 0.6 percent. The number of shares changing hands in Stoxx 600 companies was 95 percent greater than the 30-day average, according to data compiled by Bloomberg.
Roche slipped 1.4 percent to 239.10 Swiss francs after a study in south-east Asia showed the effectiveness of its Tamiflu drug remained unchanged when the dosage was doubled for patients with severe influenza.
Telecom Italia tumbled 5.8 percent to 59.9 euro cents, the biggest decline in three months. The carrier’s decision to retain the active component of its copper network may complicate the regulatory review, UBS wrote in a report, reiterating its sell rating.
Salzgitter AG slid 5.2 percent to 29.36 euros after Nomura Holdings Inc. cut its rating on the shares to reduce from neutral, saying it expects increased costs at the German company’s steel division.
Royal KPN NV lost 4.7 percent to 1.49 euros, the lowest level since September 2001. Kepler Cheuvreux downgraded the Dutch phone operator partly owned by Carlos Slim’s America Movil SAB to reduce from hold.
A gauge of food and beverage shares was the second-worst performer among 19 industry groups in the Stoxx 600. Nestle SA, the world’s biggest food company, slipped 1.9 percent to 63.45 francs and Anheuser-Busch InBev NV, the largest brewer, dropped 1.7 percent to 71.13 euros.
PostNL rallied 6.9 percent to 2.11 euros, the highest price since Jan. 11. The company said it expects so-called underlying operating income of 50 million euros ($65 million) to 90 million euros in 2013, compared with a previous forecast of 20 million euros to 60 million euros.
Deutsche Boerse AG climbed 2.2 percent to 49.79 euros after UBS wrote in a report that the exchange will benefit from possible changes to European Union proposals on financial-transaction taxes. European countries are planning to scale back the taxes, Reuters reported yesterday, citing unidentified officials.
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