European Stocks Post Weekly Drop on Fed Tapering Concerns

European stocks posted their biggest weekly loss in two months amid concern that the Federal Reserve will reduce the pace of its monthly bond purchases next month.

Heineken NV dropped 5.2 percent after the world’s third-largest brewer said that profit before some items will not grow in 2013. Deutsche Wohnen AG sank after it offered to buy Berlin’s biggest publicly traded residential landlord in an all-share transaction. Premier Oil Plc (PMO) slid 5.3 percent as the energy company posted first-half profit that missed estimates.

The Stoxx Europe 600 Index slid 0.5 percent to 304.71 this week. The gauge dropped 1.9 percent in the three days through Aug. 21 as the MSCI Emerging Markets Index plunged 3.5 percent and speculation mounted that the minutes from the Fed’s last meeting would give more details of how the central bank will slow its quantitative-easing program. The equity benchmark has still rallied 11 percent from this year’s low on June 24 as the European Central Bank said that its interest rates will remain low for an extended period of time.

“The weakness in the first three days really was led by emerging markets,” said David Moss, who helps manage $144 billion as director of European equities at F&C Investments in London. “European markets have been pretty strong of late and the weakness we saw in the emerging markets has been used as a bit of an excuse for profit taking.”

Fed Minutes

The Fed published the minutes from its July 30-31 meeting on Aug. 21. They showed that almost all the participants agreed with Chairman Ben S. Bernanke’s plan to start reducing its $85 billion of monthly bond purchases if the economy continues to improve in line with forecasts.

Policy makers will probably decide to buy fewer assets next month, according to 65 percent of economists surveyed by Bloomberg on Aug. 9-13. The Federal Open Market Committee holds its next two-day meeting on Sept. 17-18.

“The FOMC minutes didn’t tell us anything we didn’t know, but certainly the advent of tapering, whenever that may be, is at the front of people’s minds,” Moss said.

In Europe, a measure of German manufacturing compiled by Markit Economics climbed to 52 in August from 50.7 in July. The median economist estimate in a Bloomberg survey had called for a reading of 51.1. The company’s gauge of services advanced to 52.4, beating the median estimate of 51.7. Readings greater than 50 mean that activity increased.

Chinese Manufacturing

In China, a purchasing managers’ index of manufacturing in the world’s second-largest economy rose to 50.1 in August from 47.7 in July. Economists had predicted the PMI compiled by HSBC Holdings Plc and Markit would climb to 48.2.

National benchmark indexes declined in 13 of the 18 western-European markets this week. The U.K.’s FTSE 100 slipped 0.1 percent and France’s CAC 40 lost 1.3 percent. Germany’s DAX Index added 0.3 percent.

Heineken (HEIA) sank 5.2 percent this week. The Amsterdam-based company reported adjusted earnings before interest and taxes of 1.33 billion euros ($1.8 billion) for the first half, missing the average analyst estimate of 1.34 billion euros. The brewer also said that the poor weather in Europe in the spring will affect its full-year earnings.

Bankia SA and Banco de Sabadell SA led lenders lower, falling 9.7 percent and 8.3 percent, respectively. A gauge of banks slid 2.3 percent, posting the worst performance among the 19 industry groups on the Stoxx Europe 600 Index.

Holcim, Lafarge

Holcim Ltd. (HOLN) declined 5.4 percent. UBS AG downgraded the world’s largest cement maker to neutral from buy. The brokerage lowered its estimates for the company’s earnings in 2013 and 2014 because of increased costs from currency fluctuations and downward pressure on its profit margins.

Lafarge SA, the second-biggest maker of cement, decreased 1.8 percent. HeidelbergCement AG, the third-largest maker of the building material, lost 5.8 percent.

Deutsche Wohnen retreated 5.6 percent. The company, which owns 90,000 properties across Germany, offered 51 new shares for every 20 GSW shares. The combined entity would own 150,000 apartments valued at 8.5 billion euros. GSW said in a statement that it would evaluate the bid.

Premier Oil slumped 5.3 percent. The oil-and-gas explorer reported first-half net income of $161 million, falling short of the average analyst estimate of $180 million.

John Wood Group Plc fell 6.9 percent after the U.K. oil-services provider active in Africa and the Middle East lowered the profit outlook for its engineering division. Earnings at the subsidiary will probably grow 10 percent to 15 percent this year, the Aberdeen, Scotland-based company said. It had forecast growth of about 15 percent. Project delays and a weakening business in Canada will affect earnings, it said.

Veolia Advances

Veolia Environnement SA (VIE) jumped 5.3 percent. Morgan Stanley added Europe’s biggest water company to its best-ideas list.

“Veolia is the most attractive turnaround story in the sector, moving towards becoming a smaller and leaner company, and still with leadership positions in promising water and waste businesses globally,” analyst Emmanuel Turpin wrote.

Wolseley Plc (WOS) added 6.2 percent. UBS raised its recommendation on the world’s largest distributor of plumbing and heating products to buy from neutral. The brokerage cited accelerating growth in the U.S., improving momentum in the U.K. and stabilization in Europe. The bank also added Wolseley to its most preferred list of stocks.

FLSmidth & Co. A/S rallied 11 percent after the maker of cement production lines announced it will cut 1,100 jobs and close down more than 20 locations in an effort to reduce costs, after second-quarter earnings trailed analysts’ projections.

“The cost-cutting programme is more aggressive than we expected,” Nordea Bank AB analyst Patrik Setterberg wrote in a report to clients

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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