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Europe Stocks Drop From Five-Year High on Industrial Data

Photographer: Ralph Orlowski/Bloomberg

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Photographer: Ralph Orlowski/Bloomberg

A financial trader uses a telephone as he monitors data on his computer screens at the Frankfurt Stock Exchange in Frankfurt.

European stocks slipped from the highest level in more than five years as the region’s industrial output contracted more than forecast.

Sanofi fell 2.6 percent after withdrawing a U.S. application for a diabetes drug. Cie. Financiere Richemont (CFR) SA dropped 2.3 percent as revenue missed analysts’ estimates. Vivendi SA advanced 2.7 percent after saying it will begin a formal study to separate its French phone unit from its media businesses. Home Retail Group Plc (HOME) surged 5.4 percent to a two-year high as sales exceeded projections.

The Stoxx Europe 600 Index slipped less than 0.1 percent to 310.74 at the close of trading, as four stocks declined for every three that gained. The gauge climbed to the highest level since June 2008 yesterday as U.S. President Barack Obama postponed a decision on military action against Syria. The measure has soared 11 percent in 2013 as central banks around the world maintained their stimulus programs.

“We may have moved from the stabilization phase in Europe, but there’s still a lot of work to do,” said Michael Morris, head of equities at Mitsubishi UFJ Asset Management in London. “The improving economic situation is not across the board and there’s still areas of great concern, like unemployment.”

Euro-area industrial output contracted more than economists forecast in July as manufacturers struggled to shake off the legacy of a record-long recession. Factory production in the region fell 1.5 percent from June, when it gained 0.6 percent, the European Union’s statistics office said today. That’s more than the 0.3 percent contraction forecast by economists, according to the median of 33 estimates in a Bloomberg survey.

‘Awful’ Figures

“Some awful EU industrial-production figures have seriously hampered the European market’s ability to head higher,” Alastair McCaig, a market analyst at IG in London, wrote in e-mailed comments.

Still, international investors are gaining confidence in the European economy and many see the region among the best to invest, according to the latest Bloomberg Global Poll. Forty percent of the responding investors, analysts and traders who are Bloomberg subscribers said the euro-area economy is improving, more than four times the number in May. The European Union offers one of the best investment opportunities for 34 percent of those polled, up from 18 percent in May and the most since that question was first asked in October 2009.

Equity Valuations

The Stoxx 600 is trading at 14.2 times projected earnings, data compiled by Bloomberg show. That’s the highest valuation since December 2009 and 21 percent more than the five-year average of 11.7 times profit.

National benchmark indexes declined in 11 of the 18 western European markets today. Germany’s DAX (DAX) and the U.K.’s FTSE 100 were little changed, while France’s CAC 40 lost 0.3 percent.

Sanofi slid 2.6 percent to 72.32 euros in Paris. The company withdrew the application for U.S. approval of an experimental drug called lixisenatide in a delay to the company’s effort to bolster sales of diabetes medicines in the world’s biggest pharmaceutical market.

Zealand Pharma A/S, the Danish company that licensed the drug to Sanofi, plunged 15 percent to 66 kroner, the biggest drop in seven months.

Richemont declined 2.3 percent to 91.30 Swiss francs. The world’s largest jewelry maker said revenue in the Asia-Pacific region, its biggest market, rose 4 percent at constant exchange rates in the five months through August as lower sales in China offset growth in Hong Kong and Macau. That compared with growth of 12 percent for the same period last year.

Total revenue rose 9 percent excluding currency shifts, missing the 10 percent median estimate of 21 analysts gathered by Bloomberg News.

EDF Stake

EDF SA, Europe’s biggest power generator, slipped 2.6 percent to 21.65 euros. Norges Bank, the second-largest shareholder, sold 13 million shares at 21.50 euros each, according to three people familiar with the deal.

Vivendi (VIV) rose 2.7 percent to 17.15 euros. Music, pay-TV, European cinema and Internet in Brazil will make up a new media group based in France after the split with phone unit SFR, according to a statement yesterday.

Home Retail gained 5.4 percent to 172.7 pence, its highest price since June 2011. Same-store sales at its Homebase home-improvement business jumped 11 percent in the 13 weeks ended Aug. 31, more than the 3 percent median of analyst estimates compiled by Bloomberg. Sales at its Argos unit rose 2.7 percent, also exceeding the median forecast.

Bouygues Downgrade

Bouygues SA (EN), the French building, telecommunications and television company, surged 7.2 percent to 26.96 euros, the highest close since November 2011. Credit Suisse Group AG upgraded the shares to neutral, similar to a hold recommendation, from underperform.

Swiss Prime Site AG added 3 percent to 69.75 francs. The Swiss real-estate company predicted full-year earnings and profit will increase from 2012, after saying in its March annual report that both figures would be little changed in 2013.

The number of shares trading hands today in Stoxx 600-listed companies was 6.4 percent greater than the average of the past 30 days, data compiled by Bloomberg showed.

To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net

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

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