Most stocks in Europe fell as an unexpected European Central Bank interest rate cut pointed to prolonged weak growth in the region and stronger U.S. economic data fueled speculation the Federal Reserve may reduce the pace of its bond buying in the coming meetings.
HeidelbergCement AG dropped 3.8 percent after saying third-quarter profit fell 7 percent. Bureau Veritas SA lost 3.6 percent as quarterly sales missed analysts’ estimates. Siemens AG rose 3.4 percent after reporting better-than-forecast profit and saying it plans to buy back shares. Swiss Re Ltd. climbed 1.9 percent after third-quarter net income exceeded predictions.
The Stoxx Europe 600 Index lost less than 0.1 percent to 323.23 at the close of trading, paring earlier gains of as much as 1.5 percent. About three stocks fell for every two that rose. The Euro Stoxx 50 Index surged as much as 1.6 percent to an intraday level of 3,106.64, the highest since October 2008, before closing 0.4 percent down today.
“We passed the initial euphoria to begin to think why the ECB chose to cut rates now when very few of us saw it coming,” said Michael Woischneck, who helps oversee about $1.6 billion in equities at Lampe Asset Management in Dusseldorf, Germany. “A prolonged period of low interest rates also means a prolonged period of very weak growth in the euro area. I do think Europe will recover, but it will take longer than expected.”
The volume of shares changing hands in Stoxx 600-listed companies was 30 percent higher than the 30-day average, according to data compiled by Bloomberg.
The ECB lowered its benchmark interest rate to 0.25 percent from 0.5 percent, as forecast by three of 70 economists in a Bloomberg survey. The rest predicted no change. The ECB expects key interest rates to remain at the current level or lower for an extended period of time, President Mario Draghi said at a press conference after the announcement.
“We may experience a prolonged period of low inflation,” Draghi told reporters in Frankfurt. “Accordingly, our monetary policy stance will remain accommodative for as long as necessary.”
The Bank of England held its key interest rate at 0.5 percent and its asset-purchase target at 375 billion pounds ($603 billion), matching the median forecast of economists surveyed by Bloomberg.
National benchmark indexes dropped in 12 of the 18 western European markets. Germany’s DAX gained 0.4 percent, France’s CAC 40 slipped 0.1 percent and the U.K.’s FTSE 100 fell 0.7 percent.
In the U.S., a Commerce Department report today showed that the world’s biggest economy expanded in the third quarter at a faster pace than forecast. Gross domestic product rose at a 2.8 percent annualized rate after a 2.5 percent gain the prior three months, beating the median forecast of economists surveyed by Bloomberg for a 2 percent advance.
“For the U.S., we’re back to good news is bad news,” said Woischneck. “A strong GDP number means tapering could happen sooner than expected. Markets are so afraid that central banks will cut liquidity.”
HeidelbergCement slipped 3.8 percent to 56.88 euros. The world’s third-largest maker of cement said quarterly operating income before depreciation fell to 811 million euros ($1.09 billion) from 872 million euros a year earlier because of weaker currencies in emerging markets.
Bureau Veritas (BVI) fell 3.6 percent to 21.72 euros. The world’s second-biggest goods-inspection company posted third-quarter sales of 969.7 million euros late yesterday, trailing the 992 million-euro average estimate of analysts surveyed by Bloomberg.
Siemens advanced 3.4 percent to 95.66 euros after saying it will buy back 4 billion euros of shares over the next two years. Europe’s biggest engineering company reported fourth-quarter profit from continuing operations of 1.08 billion euros, surpassing the 997 million-euro average projection of analysts surveyed by Bloomberg.
Swiss Re rose 1.9 percent to 81.45 Swiss francs after the world’s second-biggest reinsurer said third-quarter profit fell to $1.07 billion from $2.18 billion a year earlier. Analysts on average had predicted profit of $775 million. The sale of a U.S. unit had boosted earnings in the year-earlier period.
Commerzbank AG jumped 10 percent to 10.26 euros, the largest gain in almost three months, as Germany’s second-biggest lender said third-quarter net income rose to 77 million euros. That beat the average analyst estimate of 32 million euros as the bank paid fewer taxes and risky-loan provisions climbed less than expected.
ArcelorMittal added 3.9 percent to 12.42 euros. The world’s largest steelmaker said Ebitda rose to $1.71 billion in the third quarter. That surpassed the $1.53 billion average analyst forecast. Full-year earnings will exceed $6.5 billion, the company said.
Societe Generale SA (GLE) gained 2.9 percent to 41.75 euros and Credit Agricole SA (ACA) added 4 percent to 9.16 euros. The French banks said they are in talks to swap stakes in asset manager Amundi Group and derivatives broker Newedge Group. Credit Agricole plans to increase its holding in Amundi to 80 percent from 75 percent, while Societe Generale will double its share of Newedge to 100 percent.
Credit Agricole posted third-quarter profit of 728 million euros, compared with a 2.85 billion-euro loss a year earlier. Societe Generale reported third-quarter net income of 534 million euros, missing the average analyst forecast of 635 million euros.
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