Europe Stocks Drop for Third Day; BG Group, Vodafone Fall

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Photographer: Matthew Lloyd/Bloomberg

RSA Insurance Group Plc fell 1.3 percent after the Sunday Times reported it is considering scrapping its final dividend to raise funds.

European stocks fell for a third day, sending the Stoxx Europe 600 Index to its lowest level in a month, with BG Group Plc and Vodafone Group Plc tumbling.

BG Group plunged 14 percent after the U.K. oil and gas producer said 2013 earnings would be lower than forecast. Vodafone lost 3.9 percent after AT&T Inc. said it doesn’t intend to make an offer for Europe’s largest mobile-phone operator. Lanxess AG climbed 8.2 percent after the chemical maker named Merck KGaA finance chief Matthias Zachert as its chief executive officer. Merck tumbled 10 percent.

The Stoxx 600 dropped 0.8 percent to 322.02 at the close of trading in London, sending its three-day decline to 4.2 percent. The Euro Stoxx 50 Index of euro-area shares slipped for a sixth day, the longest streak since November 2011.

“We’re still in the relatively early stages of an economic cycle,” Kevin Lilley, head of European equities at Old Mutual Global Investors U.K. Ltd., which manages about $17 billion, said by telephone. “You get periods where things get overbought and it’s culminated as a few companies missed their fourth-quarter numbers and emerging-markets started de-stabilizing.”

Volume of shares changing hands in companies listed on the Stoxx 600 was 40 percent higher today than the average of the past 30 days, according to data compiled by Bloomberg.

The Stoxx 600 has slumped in the last three trading days after preliminary data showed Chinese manufacturing probably contracted in January for the first time in six months and Argentine policy makers allowed the peso to devalue by reducing support in the foreign-exchange market. The U.S. Federal Reserve reviews its stimulus policies this week.

Emerging Markets

Global funds pulled $2.4 billion from emerging-market equity funds in the week through Jan. 22, capping a 13th week of outflows, Citigroup Inc. wrote in a Jan. 24 research note.

“Investors have been withdrawing cash from emerging markets,” Old Mutual Global Investors’s Lilley said. “I’ll get concerned when it becomes clear the global economy is getting impacted and when it becomes clear the GDP forecasts that are rising at the moment are too high.”

The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, which tracks the cost of protecting against stock swings in developing nations, surged 40 percent last week, the most since September 2011. The VStoxx Index, a gauge that measures volatility expectations for the Euro Stoxx 50 Index, jumped 33 percent in the period, the most since March. The European index lost 1.2 percent to 20.68 today.

German Data

In Germany, data today showed that the Ifo institute’s business climate index increased for a third month to 110.6 in January, exceeding the median prediction in a Bloomberg News poll that forecast 110. The gauge, based on a survey of 7,000 executives, rose to 109.5 in December.

A U.S. report showed that new-home sales dropped more than forecast in December. Sales fell 7 percent to a 414,000 annualized pace from a revised 445,000 rate the previous month. That compared with economists’ projections that called for a rate of 455,000.

Seventeen out of 19 industry groups in the Stoxx 600 declined today. Oil and gas companies and telephone shares led the losses, declining at least 1.5 percent each.

National benchmark gauges fell in 17 of the 18 western-European markets. The U.K.’s FTSE 100 lost 1.7 percent, while Germany’s DAX slid 0.5 percent and France’s CAC 40 declined 0.4 percent. The Swiss Market Index fell 0.9 percent.

BG Group plunged 14 percent to 1,082 pence, its biggest drop since at least 1988, after saying reduced liquefied natural gas shipments from Egypt and U.S. forward-gas prices will hurt profit. Total earnings for 2013 will be $2.2 billion, or about 65 cents a share, BG said in a statement. The company expects production to be 590,000 to 630,000 barrels a day this year, lower than 2013’s 633,000 barrels a day.

Vodafone Falls

Vodafone lost 3.9 percent to 223.6 pence. AT&T said it reserves the right to announce or participate in an offer after a six-month restricted period. Separately, people familiar with the matter said Vodafone is seeking to acquire Grupo Corporativo ONO SA as the Spanish cable operator prepares for an initial public offering.

Banco Popolare SC, Italy’s fourth-biggest bank, tumbled 15 percent to 1.29 euros for the biggest plunge since December 2008. The lender said last week it planned to sell as much as 1.5 billion euros ($2.1 billion) of shares to bolster capital.

Ziggo NV dropped 2.9 percent to 32.30 euros. Liberty Global Plc, the company controlled by billionaire John Malone, agreed to take over the Dutch broadband provider for 4.9 billion euros. Ziggo is seeking 3.7 billion euros of loans to finance its buyout, said a person with knowledge of the matter.

RBS Declines

Royal Bank of Scotland Group Plc fell 2.2 percent to 332.2 pence. The largest state-owned British lender set aside 3.1 billion pounds ($5.1 billion) to cover the cost of lawsuits tied to mortgage-backed securities and redress for clients wrongly sold swaps and payment-protection insurance.

Lanxess jumped 8.2 percent to 48.72 euros, while Merck slumped 10 percent to 119.3 euros. Current CEO Alex Heitmann will leave as of Feb. 28 and Zachert will start May 15. Lanxess was the second-worst performer on Germany’s benchmark DAX Index in 2013, losing 27 percent. Merck climbed 30 percent last year.

Ericsson AB added 2.3 percent to 76.80 kronor. The network-equipment maker and Samsung Electronics Co. settled their patent dispute and struck a new licensing deal for wireless technology in smartphones, televisions, tablets and Blu-Ray disk players.

The pact will increase Ericsson’s fourth-quarter sales by 4.2 billion kronor ($652 million) and boost net income by 3.3 billion kronor initially. It also includes continuing royalty payments to Ericsson, the Stockholm-based said in a statement.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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