European Stocks Decline, Posting Worst January Since 2010

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A financial trader speaks into a telephone headset as the DAX Index curve is seen beyond at the Frankfurt Stock Exchange in Frankfurt. Close

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Photographer: Ralph Orlowski/Bloomberg

A financial trader speaks into a telephone headset as the DAX Index curve is seen beyond at the Frankfurt Stock Exchange in Frankfurt.

European stocks fell, posting their worst start to the year since 2010, as companies from Electrolux AB to Vedanta Resources Plc dropped after reporting results.

Electrolux slid the most since August 2011 after earnings missed analysts’ estimates. Vedanta Resources Plc lost 3.6 percent after saying copper output in Zambia, Australia and India declined. LVMH Moet Hennessy Louis Vuitton SA jumped 7.9 percent after reporting growth in fashion and leather-goods sales rebounded in the fourth quarter.

The Stoxx Europe 600 Index slipped 0.3 percent to 322.52 at the close of trading, paring earlier losses of as much as 1.7 percent. The equities measure declined 1.8 percent this month as emerging-market currencies tumbled, a Chinese manufacturing gauge contracted and the Federal Reserve slowed its pace of bond buying. The index fell 0.7 percent this week.

“Markets were ripe for consolidation,” Christian Stocker, a senior strategist at UniCredit Bank AG in Munich, said by phone. “This week, we’ve seen synchronized volatility in the markets, with very weak currencies and disappointing Chinese manufacturing figures. We need an increase in earnings momentum to see stock prices go higher.”

A gauge of 20 emerging-market currencies, including Brazil’s real, Russia’s ruble and Turkey’s lira, tracked by Bloomberg fell 0.2 percent, its 14th drop in 15 days.

The VStoxx Index, a measure of volatility expectations for the Euro Stoxx 50 Index, rose 3.3 percent to 21.82, after earlier jumping as much as 16 percent.

Euro-Area Unemployment

Euro-area unemployment held at 12 percent in December, a Eurostat report showed. November’s level was revised to 12 percent, down from a record 12.1 percent in September.

National benchmark indexes retreated in 13 of the 18 western European markets. The U.K.’s FTSE 100 dropped 0.4 percent, Germany’s DAX slipped 0.7 percent and France’s CAC lost 0.3 percent.

Electrolux dropped 8.8 percent to 139.20 kronor. The world’s second-biggest maker of home appliances said fourth-quarter earnings before interest and taxes fell 23 percent to 1.22 billion kronor ($187 million), missing the average analyst estimate for 1.38 billion kronor in a Bloomberg survey.

Vedanta slid 3.6 percent to 807.5 pence. The metals and oil producer said total integrated copper output at its Zambian subsidiary declined 24 percent to 31,000 metric tons in the third quarter. Production of the metal, which accounted for more than a third of the company’s revenue last year, also fell at its Australian and Indian operations.

Diageo Retreats

Diageo Plc (DGE), which yesterday said a slowdown in emerging markets weighed on first-half sales, fell 1.9 percent to 1,786 pence, capping its biggest two-day loss since August 2011. Goldman Sachs Group Inc. downgraded the world’s largest distiller to neutral from buy, citing continued challenges to growth in emerging markets.

Almost 48 percent of Diageo’s revenue last year came from Africa, eastern Europe, Turkey, Latin America, the Caribbean and Asia-Pacific regions, according to data compiled by Bloomberg.

An index of banking stocks was among the worst performers on the Stoxx 600. The European Banking Authority said today that the region’s biggest lenders will have to show their capital will not fall below 5.5 percent of their assets in an economic crisis.

HSBC Holdings Plc, Europe’s biggest lender, declined 0.5 percent to 627 pence, paring earlier losses of as much as 1.9 percent.

Deutsche Bank AG slipped 2.8 percent to 35.89 euros. Barclays Plc lowered its rating on Germany’s largest lender to equal weight from overweight, saying it is struggling more than its competitors with deleveraging.

Luxury Goods

LVMH jumped 7.9 percent, the most since May 2010, to 132.15 euros. The world’s largest luxury-goods maker said sales at its fashion and leather-goods unit, which includes Louis Vuitton and Kenzo, rose 7 percent in the final three months of 2013, from 4 percent in the first nine months of the year.

A measure of personal and household-goods companies posted the best performance on the Stoxx 600. Christian Dior SA climbed 5 percent, the most since September 2011, to 135.70 euros, and Hermes International SCA gained 4.1 percent to 236.25 euros.

BT Group Plc (BT/A) advanced 3.3 percent to 383.3 pence. The biggest U.K. phone company reported third-quarter adjusted earnings before interest, taxes, depreciation and amortization of 1.54 billion pounds ($2.54 billion). The average prediction of analysts surveyed by Bloomberg was for 1.5 billion pounds. BT also forecast full-year Ebitda may reach the upper limit of its previous prediction of 6 billion pounds to 6.1 billion pounds.

Novo Nordisk A/S (NOVOB) rose 3.6 percent to 219 kroner, the highest price since at least 1991. Swedbank AB raised its recommendation on the drugmaker to buy from neutral, citing a number of phase-three treatment studies that will help it expand its product offering in the next six to 18 months.

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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