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European Stocks Decline After U.S. Jobs Data Trails Forecasts

European stocks climb on earnings
The gauge has rallied 2.7 percent this week as better-than-estimated results from companies such as HSBC Holdings Plc boosted optimism that the economy will continue to grow. Photographer: Jason Alden/Bloomberg

European stocks dropped, trimming this week’s rally in the Stoxx Europe 600 Index, after a government report showed the U.S. lost more jobs last month than economists had forecast.

Banco Santander SA and Nestle SA led declines on the benchmark Stoxx 600. Anheuser-Busch InBev NV paced brewing companies lower as wheat traded close to the highest level in almost two years. Dexia SA tumbled 4.7 percent after reporting a decline in earnings.

The Stoxx 600 lost 1.1 percent to 258.71 at the 4:30 p.m. close in London, paring its weekly rally to 1.3 percent, as all 19 industry groups fell. Stocks advanced this week as better-than-estimated results from companies such as HSBC Holdings Plc and BNP Paribas SA boosted optimism that the economy will continue to grow.

“The data’s pointing to the recovery being very slow and protracted,” said Gregor Smith, a fund manager at Daiwa Asset Management in London, who helps oversee about $1 billion. “It’s a bit of a surprise it’s as weak as it was. It’s going to feel pretty painful.”

Overall employment in the U.S. fell 131,000, missing the average forecast for a decline of 65,000, while unemployment held at 9.5 percent, Labor Department figures in Washington showed today.

Private Payrolls

Companies added workers in July for a seventh straight month at a pace that suggests the labor-market recovery will be slow to take hold. Private payrolls that exclude government agencies rose by 71,000 after a June gain of 31,000 that was smaller than previously reported. Economists projected a 90,000 July increase, according to the median estimate in a Bloomberg News survey.

The U.S. economy has expanded for four straight quarters after shrinking for five of the previous six as the collapse of the subprime mortgage industry triggered the worst contraction since the Great Depression. Growth slowed to 2.4 percent in the first quarter from 3.7 percent at the end of 2009, spurring concern the nation is at risk of entering another recession as government stimulus programs expire.

National benchmark indexes dropped in all 18 western European markets. The U.K.’s FTSE 100 Index retreated 0.6 percent, Germany’s DAX lost 1.2 percent and France’s CAC 40 fell 1.3 percent.

Santander declined 2.6 percent to 10.11 euros. Nestle retreated 1 percent to 50.55 Swiss francs.

Wheat Prices

Food and beverage stocks were the biggest decliners on the Stoxx 600 as wheat prices traded close to a two-year high amid concern that other nations may follow Russia’s export ban. Anheuser-Busch InBev, the world’s largest brewer, sank 3.9 percent to 39.19 euros. Heineken NV lost 3.5 percent to 33.93 euros and Carlsberg AS slumped 5.1 percent to 489 euros.

Dexia, which received billions of euros in capital and funding guarantees from France, Belgium and Luxembourg during the credit crunch, said second-quarter profit dropped 12 percent, hurt by a loss at its Slovak unit and lower revenue. The shares lost 4.7 percent to 3.78 euros.

Lonmin Plc sank 5.1 percent to 1,557 pence. South Africa’s government ordered the company to halt sales of non-platinum- group metals. Lonmin said it would seek an urgent court ruling to overturn the order.

Beaten Estimates

About 55 percent of Stoxx 600 members that have posted results since July 12 have beaten analysts’ estimates for net income, according to data compiled by Bloomberg. That compares with 66 percent of S&P 500 companies during the same period, the data show.

Umicore SA climbed 3.4 percent to 28.73 euros. Full-year profit before interest, tax and one-time items will increase to a range of 315 million euros ($415 million) to 335 million euros, up from a previous forecast of 260 million euros to 290 million euros, the company said.

Natixis SA advanced 2.8 percent to 4.41 euros. The investment-banking unit of France’s second-biggest bank by branches had second-quarter net income of 522 million euros, compared with a year-earlier loss of 819 million euros.

Logica Plc surged 6.1 percent to 116.1 pence, the highest level since June and the biggest rally on the Stoxx 600 today. The Anglo-Dutch computer-services provider said its interim dividend will increase to 1.9 pence a share from 1 penny. This was more than the 1.2 pence forecast increase by Panmure Gordon & Co. analyst George O’Connor, who said “Logica’s message is that it is back to pre-the downturn.”

Syngenta AG climbed 3.1 percent to 250.9 pence. Citigroup Inc. upgraded Syngenta to “buy” from “hold,” citing a recovery in grain prices and saying de-stocking in the agricultural chain has ended. Yara International ASA gained 1.5 percent to 250 kroner.

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