European stocks dropped, following their biggest annual advance since 2009, as utilities declined, while a report showed U.S. manufacturing slowed last month.
RWE AG slipped 3.6 percent after Handelsblatt reported that the German utility may ask shareholders to give it the option to raise capital. CGG SA fell 3 percent after UBS AG lowered its rating on the surveyor of oilfields. Fiat (F) SpA rallied the most since April 2009 after agreeing to buy the rest of Chrysler Group LLC, enabling the Italian and U.S. companies to merge.
The Stoxx Europe 600 Index slipped 0.7 percent to 325.82 at the close in London, its largest decline in two weeks. Global equities soared by $9.6 trillion in 2013 as central-bank bond buying helped the U.S. economy gain momentum, while the euro area emerged from recession. European stocks rallied 17 percent in 2013. Their biggest increase since 2009 sent the Stoxx 600 to 15.4 times its constituents’ projected earnings, up from 12.7 times at the beginning of 2013.
“We need to see the European economy and company earnings prove last year’s wishful thinking,” said Tobias Britsch, who helps oversee about $36 billion at Meriten Investment Management GmbH, in Dusseldorf, Germany. “Countries like France need to show they can turn the page. It’s crucial to see earnings growth follow valuation expansion.”
In the U.S., the Institute for Supply Management’s manufacturing index slipped to 57 in December from 57.3 in November, which was its highest level in more than two years. Figures greater than 50 mean that activity expanded.
Final readings today confirmed that manufacturing in the euro zone expanded last month at the fastest pace since May 2011, while output in Germany, the currency bloc’s largest economy, expanded for a sixth consecutive month. French manufacturing contracted for a 22nd consecutive month.
National benchmark indexes fell in 12 of the 17 western-European markets that opened today. The U.K.’s FTSE 100 Index slipped 0.5 percent, while Germany’s DAX and France’s CAC 40 dropped 1.6 percent. The VStoxx Index, which measures expected volatility in euro-area stocks, climbed 9.7 percent to 18.93.
RWE slipped 3.6 percent to 25.65 euros after Handelsblatt reported that the German utility will seek approval at its annual general meeting on April 16 to raise capital by as much as 10 percent. The newspaper cited unidentified people close to the company’s supervisory board. RWE spokesman Michael Murphy told Bloomberg News that the utility does not plan a capital increase for the forseeable future.
The 26-member Stoxx 600 Utilities Index fell 1.4 percent, its biggest decline in four weeks. Germany’s EON SE retreated 2.7 percent to 13.06 euros, while France’s GDF Suez SA dropped 2.2 percent to 16.72 euros. Madrid-based Endesa SA decreased 2.7 percent to 21.17 euros after finishing last year at its highest price since June 2011.
CGG lost 3 percent to 12.20 euros as UBS lowered its rating on the stock to neutral from buy and reduced its estimate for 2013 earnings before interest and taxes to $392 million from $504 million. UBS analyst Caroline Hickson said the company’s presentation to investors and analysts in December failed to reassure investors because of weaker-than-expected long-term targets and little guidance for 2014.
A gauge of mining stocks fell 0.8 percent after the Chinese government’s manufacturing gauge showed output in the world’s second-biggest economy expanded in December at a slower pace than economists had forecast. Rio Tinto Group and Anglo American Plc, the owner of the world’s largest platinum producer, lost 1.2 percent to 3,370 pence and 2.1 percent to 1,292 pence, respectively.
Ophir Energy Plc dropped 8.2 percent to 300.9 pence after the oil explorer said drilling tests at its Mlinzi Mbali-1 well off the coast of Tanzania failed to find oil. The stock tumbled 25 percent in 2013.
Fiat rallied 16 percent to 6.92 euros. The Italian carmaker said it will pay a United Auto Workers retiree health-care trust $1.75 billion in cash for the stake when the deal closes, which Fiat expects by Jan. 20. Chrysler will contribute $1.9 billion through a special dividend, as well as paying the trust $700 million in four annual installments, according to a statement.
Exor SpA, which owns a 30 percent stake in Fiat, advanced 4.5 percent to 30.20 euros, the shares’ biggest increase in almost six months.
Polymetal International Plc and Fresnillo Plc, which own silver and gold mines, added 1.7 percent to 584.5 pence and 1.3 percent to 755 pence, respectively. Both precious metals rebounded today after completing their worst year since 1981. Randgold Resources Ltd. gained 3.8 percent to 3,934 pence, following its largest annual decline since 1998.
Metso Oyj advanced 2.1 percent to 24.32 euros after the Finnish engineering-services company spun off Valmet Corp., its pulp, paper and power business. Valmet’s shares traded at 6.65 euros today following the initial public offering.
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