European Stocks Decline on Fed Stimulus Speculation

European stocks declined as comments from Federal Reserve policy makers fueled speculation the central bank will begin tapering stimulus next month, and as companies from Salzgitter AG to Lanxess AG cut profit forecasts.

Salzgitter, Germany’s second-largest steelmaker, tumbled 12 percent after saying it expects a pretax loss of about 400 million euros ($530 million) this year. Lanxess lost 4.3 percent after saying it sees no increase in demand in the second half. InterContinental Hotels Group Plc rose 6.4 percent after posting an increase in first-half profit.

The Stoxx Europe 600 Index lost 0.4 percent to 303.5 at the close of trading. The benchmark gauge erased earlier gains of as much as 0.4 percent as Fed Bank of Atlanta President Dennis Lockhart said in an interview with Market News International that if economic growth and job creation pick up as expected, the central bank should proceed with the “removal” of its asset purchases, and as investors awaited remarks from Fed Bank of Chicago President Charles Evans.

“It looks like markets on both side of the pond are nervous ahead of Fed Bank of Chicago President Charles Evans, who is due to talk later,” Stephane Ekolo, a strategist at Kyte Group Ltd. in London, wrote in an e-mail. “Taper talk was at the origin of the selloff, with Fed President Lockhart cited as saying it could start curtailing its bond-buying program at any of three remaining FOMC meetings.”

The Stoxx 600 added 1.8 percent last week as European Central Bank President Mario Draghi said interest rates in the euro zone will remain low for an extended period.

Fisher Comments

Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, yesterday warned investors not to rely on stimulus.

“Financial markets may have become too accustomed to what some have depicted as a Fed put,” or the idea that the central bank will loosen credit after a market decline, Fisher said yesterday in a speech in Portland, Oregon.

National benchmark indexes retreated in 14 of the 18 western-European markets today. The U.K.’s FTSE 100 dropped 0.2 percent, Germany’s DAX fell 1.2 percent and France’s CAC 40 slipped 0.4 percent.

Salzgitter tumbled 12 percent to 25.27 euros, its biggest decline since March 2009. The steelmaker expects a pretax loss of about 400 million euros this year amid a slump in demand due to the deterioration of the European economy. “The ongoing recession in many European countries has put pressure on the European steel industry in the form of a structural crisis,” it said yesterday after the close of regular trading.

Lanxess Forecast

Lanxess retreated 4.3 percent to 44.48 euros after it cut its profit forecast for 2014 and predicted no recovery in second-half demand. The Cologne, Germany-based company said it won’t achieve its Ebitda target for next year of 1.4 billion euros. It forecast earnings for this year of 700 million euros to 800 million euros.

Munich Re (MUV2), the world’s biggest reinsurer, dropped 4.9 percent to 145.25 euros after it said second-quarter profit fell 35 percent, missing analysts’ estimates, as claims arising from natural disasters rose. Net income dropped to 529 million euros from 808 million euros a year earlier, trailing the 557.1 million-euro average estimate of analysts surveyed by Bloomberg.

Randgold Resources Ltd. (RRS), a gold miner in Africa, declined 5.6 percent to 4,428 pence. Fresnillo Plc, the world’s biggest primary silver producer, sank 11 percent to 924.5 pence after cutting its interim dividend by 68 percent from a year earlier because of a slump in precious-metal prices.

A gauge of commodity producers fell the most among the 19 industry groups in the Stoxx 600.

InterContinental Gains

InterContinental Hotels rose 6.4 percent to 2,030 pence after the world’s largest provider of hotel rooms reported first-half net income of $340 million, compared with $271 million a year earlier.

UniCredit SpA (UCG) added 2.2 percent to 4.26 euros. Italy’s biggest bank said second-quarter net income climbed to 361 million euros from 169 million euros a year earlier. That was in line with the 360 million-euro average estimate of eight analysts surveyed by Bloomberg. The Milan-based bank posted a 254 million-euro return from the buyback of 4.2 billion euros of senior securities in April, according to a statement today.

Royal DSM NV (DSM) gained 6.4 percent to 56.02 euros. The Dutch chemical company posted second-quarter profit that beat analyst estimates after a $3.1 billion-acquisition spree and as it cut costs. Earnings before interest, taxes, depreciation and amortization jumped 19 percent to 345 million euros. That exceeded the 333 million-euro average estimate of 11 analysts.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.