European Stocks Decline as Air France Warns on Earnings

European stocks fell the most in almost three months, led by travel and leisure companies, after Air France-KLM (AF) Group cut its full-year profit forecast.

Air France-KLM slumped the most since October 2011 after saying earnings will be hurt amid overcapacity on North American and Asian routes, poor demand for freight and the fallout from a dispute with Venezuela. Commerzbank AG fell to its lowest price since December after a person with knowledge of the matter said it will probably be the next bank to resolve alleged U.S. sanctions violations.

The Stoxx 600 slipped 1.4 percent to 339.99 at the close of trading, for its third day of declines. The equity gauge fell the most in almost two weeks yesterday as investors assessed valuations following the biggest rally since March.

“The market may be starting to see a selloff as the expected upside in earnings begins to dwindle,” Daniel Weston, a portfolio manager at Aimed Capital GmbH in Munich, wrote in an e-mail. “We may have seen the top of the market already.”

The Stoxx 600 index traded at 15.5 times the estimated earnings of its members yesterday, near its highest valuation since 2009. Companies in the benchmark measure will post earnings growth of about 8.3 percent this year, according to estimates compiled by Bloomberg.

Alcoa Inc. unofficially opens the second-quarter U.S. earnings season today. Profit at companies in the S&P 500 increased 5 percent in the three months through June, estimates compiled by Bloomberg show.

National Indexes

National benchmark indexes fell in all of the 18 western-European markets today. France’s CAC 40 retreated 1.4 percent, the U.K.’s FTSE 100 lost 1.3 percent, and Germany’s DAX slipped 1.4 percent.

The volume of shares changing hands in Stoxx 600-listed companies was 19 percent greater than the 30-day average, according to data compiled by Bloomberg.

Air France-KLM slipped 8.7 percent to 8.58 euros. Europe’s largest airline predicted earnings before interest, taxes, depreciation and amortization will reach 2.2 billion euros ($3 billion) to 2.3 billion euros this year, compared with a previous target of as much as 2.5 billion euros.

International Consolidated Airlines Group SA (IAG), the parent company of British Airways, fell 7 percent to 335.9 pence, its biggest drop since November 2011. EasyJet Plc retreated 5.8 percent to 1,248 pence, its lowest price since November. A measure of travel and leisure stocks fell 2.6 percent, for the biggest decline of the 19 industry groups on the Stoxx 600.

Commerzbank lost 5.6 percent to 10.85 euros. Germany’s second-biggest bank may incur penalties of at least $500 million as part of a deferred prosecution agreement with authorities in the U.S., the person said, asking not to be named because the talks are confidential.

Marks & Spencer

Marks & Spencer Group Plc (MKS) slipped 1.3 percent to 427.4 pence. The U.K.’s largest clothing retailer reported a 12th straight quarterly drop in non-food sales. Same-store sales of general merchandise, a division that mostly comprises apparel, fell 1.5 percent in the 13 weeks ended June 28, according to a statement. That compares with the median estimate of analysts surveyed by Bloomberg News for a 1 percent decline.

Shire Plc (SHP) declined 2.6 percent to 4,530 pence after AbbVie Inc. (ABBV) made a fourth offer to buy the drugmaker. AbbVie increased its bid by about 11 percent to 51.15 pounds ($87.58) a share in cash and stock. Shire said its board would meet to discuss the takeover offer.

Royal Philips NV (PHIA) climbed 1.4 percent to 23.43 euros. The Dutch company announced a new management structure for its health-care business after Deborah DiSanzo quit as its head amid “disappointing” second-quarter results. Philips said Ebita at the division will improve in the second half of the year.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

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

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