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European Stocks Retreat After U.S. Manufacturing Report

European stocks declined from a seven-week high as a measure of U.S. manufacturing unexpectedly slumped, outweighing gains by companies from Royal KPN NV to Vivendi SA on plans to sell assets.

Sulzer AG (SUN) plunged the most since October 2008 after lowering its forecast on full-year profitability. KPN jumped to its highest price in more than five months after agreeing to sell its German mobile-phone business to Telefonica SA. Vivendi climbed the most in eight weeks after saying it has held talks to sell a 53 percent stake in Maroc Telecom SA to Emirates Telecommunications Corp.

The Stoxx Europe 600 Index dropped 0.3 percent to 299.44 at the close of trading, erasing an earlier gain of as much as 0.5 percent. The equity benchmark rose for a fourth day yesterday as companies from UBS AG to Royal Philips Electronics NV reported increased profit.

“The mergers and acquisitions story is a perfect example that market focus is on more company-specific stories before investors will turn their attention back to European macro releases later this week,” wrote Witold Bahrke, a Copenhagen-based senior strategist at PFA Pension A/S, which oversees about $55 billion.

Markit Economics will probably report tomorrow that its composite index based on a survey of purchasing managers in the euro area’s services and manufacturing industries rose in July. The measure climbed to 49.1 from 48.7 in June, according to the median forecast in a Bloomberg survey.

In Germany, the Ifo institute releases its business-climate index on Thursday. Economists surveyed by Bloomberg forecast the measure will rise to 106.1 in July from 105.9 in June.

U.S. Manufacturing

In the U.S., a measure of manufacturing in the region covered by the Federal Bank of Richmond unexpectedly slumped to minus 11 in July from a revised plus 7 the previous month. The median estimate of economists surveyed by Bloomberg had called for a reading of plus 9.

The volume of shares changing hands in companies listed on the Stoxx 600 was 7.5 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

National benchmark indexes rose in 10 of the 18 western-European markets today. France’s CAC 40 and the U.K.’s FTSE 100 slipped 0.4 percent, while Germany’s DAX fell 0.2 percent.

Sulzer AG plunged 14 percent to 142.50 Swiss francs. The Swiss pump maker said it expects full-year profitability to decline rather than increase. Sulzer posted a 23 percent tumble in first-half profit to 99.5 million francs ($106 million), falling short of the median analyst estimate of 142.5 million francs.

Consecutive Losses

STMicroelectronics NV (STM) slid 11 percent to 6.73 euros, its biggest drop since April 2012. Intel Corp.’s biggest competitor in Europe reported a seventh consecutive quarter of losses. It lost $152 million in the second quarter, according to a statement. Revenue slipped 4.8 percent to $2.05 billion.

Tullow Oil Plc slumped 6.6 percent to 1,041 pence after failing to find commercial quantities of crude oil or gas at two wells off the coasts of Mozambique and French Guiana.

KPN added 2.8 percent to 1.85 euros after the Dutch company agreed to sell its E-Plus mobile-phone business for 5 billion euros ($6.6 billion) to Telefonica’s German unit. KPN will take a 17 percent stake in Telefonica Deutschland Holding AG, which is controlled by Spain’s largest carrier, Telefonica. The shares rallied 13 percent yesterday when KPN confirmed it had held talks about selling the business.

KPN, Vivendi

Separately, KPN posted a second-quarter profit of 107 million euros, missing the average analyst estimate of 145 million euros. Telefonica gained 2.3 percent to 10.29 euros, while Telefonica Deutschland slipped 5.3 percent to 5.39 euros.

Vivendi (VIV) advanced 2.4 percent to 16.08 euros. The media and telecommunications conglomerate said it has entered exclusive talks with Etisalat to sell a 53 percent stake in the Moroccan phone company for 4.2 billion euros.

Bouygues SA surged 6.9 percent to 22 euros. The company said it has begun talks to share its mobile-phone network in France with Vivendi’s SFR.

Swatch Group AG (UHR) advanced 1.7 percent to 538.50 Swiss francs. The biggest maker of Swiss watches said it expects a strong second half after first-half profit rose. Net income increased 6.1 percent to 768 million Swiss francs, the Biel, Switzerland-based company said in a statement.

Glencore Xstrata Plc rose 5.1 percent to 282.7 pence. A gauge of commodity producers posted the best performance of the 19 industry groups on the Stoxx 600. China’s Premier Li Keqiang said the world’s second-biggest economy will grow by a minimum of 7 percent, according to a report in the Beijing News.

Enagas SA added 2.2 percent to 19.18 euros. The operator of Spain’s natural-gas grid reported that profit climbed 9 percent to 202.1 million euros in the first half.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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