European Stocks Drop After U.S. Services, Orders Reports

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Financial traders monitor data on computer screens as the DAX Index curve is seen beyond at the Frankfurt Stock Exchange in Frankfurt. Close

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Photographer: Ralph Orlowski/Bloomberg

Financial traders monitor data on computer screens as the DAX Index curve is seen beyond at the Frankfurt Stock Exchange in Frankfurt.

European stocks fell after a U.S. report that showed weakness in the services industry, while factory orders rose faster than forecast.

Remy Cointreau SA and Edenred (EDEN) SA each fell at least 2.1 percent after Natixis SA cut its stock recommendations. Ziggo NV rallied 3.6 percent after people familiar with the matter said Liberty Global Plc is preparing an acquisition of the Dutch broadband provider. RSA Insurance Group Plc jumped 6.2 percent after a report said the insurer’s Irish unit won’t require further capital injections. Banca Monte dei Paschi di Siena SpA and Commerzbank AG helped send European lenders higher.

The Stoxx Europe 600 Index lost 0.2 percent to 326.98 at the close of trading in London. The benchmark gauge climbed 5.8 percent from its Dec. 13 low through Jan. 3.

“We’ve seen a very strong Christmas rally,” Veronika Pechlaner, who helps oversee $2.3 billion as an investment manager at Jersey, Channel Islands-based Ashburton Ltd., said by phone. “We’re seeing a bit of consolidation. Valuations have risen in the last year, so earnings growth will play a larger role in determining returns. We may see a bit more volatility.”

The Stoxx 600 rallied 17 percent last year as central banks around the world kept interest rates low. That pushed the valuation of companies on the European stocks gauge to 13.7 times estimated earnings, compared with a five-year average of 12.1 times, data compiled by Bloomberg show.

China Data

A U.S. report showed that the Institute for Supply Management’s non-manufacturing index fell to 53 last month from 53.9 in November. Economists in a Bloomberg survey had forecast a reading of 54.7. A separate release showed factory orders in the world’s biggest economy climbed 1.8 percent in November. The median economist estimate called for a 1.7 percent increase.

In China, a purchasing managers’ index of the services industry fell to 50.9 in December from 52.5 the previous month, data from HSBC Holdings Plc and Markit Economics showed. Readings above 50 indicate expansion. Figures from the National Bureau of Statistics and the China Federation of Logistics and Purchasing last week showed services in the world’s second-biggest economy fell in December to the slowest in four months.

National benchmark indexes rose in eight of the 14 western-European markets open today. The U.K.’s FTSE 100 was little changed and Germany’s DAX slipped 0.1 percent. France’s CAC 40 fell 0.5 percent. Stock markets in Sweden, Finland, Austria and Greece were closed today for the Epiphany holiday.

Cointreau Drops

Remy Cointreau fell 2.1 percent to 57.70 euros. Natixis lowered its rating on the producer of Remy Martin cognac to neutral from buy after Frederic Pflanz resigned as chief executive officer last week.

Edenred dropped 5.5 percent to 22.95 euros after Natixis downgraded the shares to neutral from buy. The brokerage said currencies will weigh on company earnings. The company, which sells vouchers for meals and services, got 49 percent of its revenue from Latin America and the Caribbeans in 2012, data compiled by Bloomberg show.

John Wood Group Plc (WG/) slid 3.8 percent to 652 pence after Deutsche Bank AG cut its rating on the shares to hold from buy, citing a lack of possible factors for gains and limited potential for earnings to grow in the next year.

Ziggo climbed 3.6 percent to 33.77 euros. Liberty Global, controlled by billionaire John Malone, and Ziggo plan to announce a deal as early as the middle of this month, according to people familiar with the matter. The two companies are finalizing the acquisition price and other terms, they said. Ziggo spokesman Martijn Jonker and Liberty Global spokesman Marcus Smith declined to comment.

RSA Jumps

RSA jumped 6.2 percent to 97.9 pence. A report led by PricewaterhouseCoopers LLP, due Jan. 9, will probably show irregular accounting and a capital shortfall at its Irish unit were isolated incidents, the Sunday Telegraph reported without saying where it got the information. RSA spokesman Jon Sellors declined to comment on the article.

Centamin Plc (CEY) rallied 2.9 percent to 46.55 pence after the gold miner said preliminary results indicate full-year production of 356,943 ounces, up 36 percent from 2012. That exceeded the company’s previous forecast of 320,000 ounces.

A gauge of banks in the Stoxx 600 added 0.8 percent, the most among 19 industry groups. Monte dei Paschi advanced 2.2 percent to 18.1 euro cents for a seventh day of gains out of eight. Repubblica said that CEO Fabrizio Viola and Chairman Alessandro Profumo may resign, without specifying where it got the information. Corriere della Sera reported some Italian and U.S. funds may consider buying a 20 percent stake in the lender.

Banks Rise

Banco Popolare SC rose 3.1 percent to 1.45 euros. UniCredit SpA climbed 3.3 percent to 5.62 euros. Mediobanca SpA advanced 2.4 percent to 6.54 euros. Spain’s Banco Popular Espanol SA jumped 7 percent to 4.65 euros for the biggest increase in the Stoxx 600.

Commerzbank gained 3.7 percent to 11.71 euros after Euro am Sonntag reported that the lender plans to expand its wealth-management unit. The newspaper cited an interview with unit head Gustav Holtkemper.

Vestas Wind Systems A/S rose 5.5 percent to 186.1 kroner in a ninth consecutive day of gains. The biggest wind-turbine maker upgraded its estimate for free cash flow for 2013 to approximately 1 billion euros ($1.4 billion) from a previous forecast of 500 million euros to 700 million euros.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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