European Stocks Fall After U.S. Factory Data; Repsol Jumps

European Stocks Climb as Repsol Shares Rally
HSBC Holdings Plc increased 1.5 percent as Goldman Sachs Group Inc. recommended Europe’s largest bank. Photographer: Jerome Favre/Bloomberg

European stocks fell after a report showed growth in U.S. manufacturing slowed in September, prompting speculation that last month’s rally in equities has overshot the prospects for economic growth.

Banco Santander SA retreated after European Union officials warned that the fallout from the debt crisis could hurt Europe’s lenders. Swatch Group AG fell 4.1 percent as its Chief Executive Officer Nick Hayek Jr. said the weakness of the dollar is hurting profit. Repsol led energy producers higher, jumping 5.3 percent after saying China Petrochemical Corp. will invest $7.1 billion in its Brazilian unit.

The benchmark Stoxx Europe 600 Index fell 0.3 percent to 258.95 at 3:47 p.m. in London, extending its biggest weekly drop in three months. Stocks declined as a report from the U.S. Institute for Supply Management showed manufacturing expanded in September at the slowest pace in 10 months, while measures of orders and production fell to the lowest level since June 2009.

“We’ve had a superbly strong September and people were waiting for ISM to see if this rally can be carried forward,” said Alberto Espelosin, who helps manage about $12 billion at Zaragoza, Spain-based Ibercaja Gestion. “With a report on manufacturing that’s just in line, and within normal levels of expansion, it will stress the case for some consolidation or profit taking in indexes. Only a very positive number would have helped markets in what is a very volatile and range-bound session.”

Derail Recovery

The Stoxx 600 is heading for a 1.4 percent drop this week amid lingering concern that the region’s sovereign-debt will derail the economic recovery. Still, the gauge yesterday completed its biggest quarterly gain in a year.

The ISM’s factory index dropped to 54.4 from 56.3 in August, the Tempe, Arizona-based group said today. Readings greater than 50 signal growth and economists forecast a decline to 54.5, according to the median estimate in a Bloomberg News survey.

Stocks rallied earlier today after a report showed China’s manufacturing expanded at the fastest pace in four months in September, adding to signs that economic growth is stabilizing.

“There is something of a paradox going on,” said Manoj Ladwa, a London-based senior trader at ETX Capital. “Traders are split between two camps -- either we have seen the worst of the economic crisis and we are on a path to recovery, or we going to see a double dip.”

Brussels Meeting

Banks declined after the EU said the region’s lenders may be at risk of contagion from the region’s debt crisis, just one day after Ireland said it will take majority ownership of Allied Irish Banks Plc, its second bailout of the lender.

A statement issued after a meeting in Brussels today said that finance ministers and central bank governors had “pointed out the risks related to the sovereign debt market that could have a contagious effect on the banking sector.”

Santander, Spain’s largest bank, fell 2.5 percent to 9.08 euros, while rival Banco Bilbao Vizcaya Argentaria SA lost 2 percent to 9.71 euros. Moody’s Investors Service yesterday cut Spain’s top credit rating by one notch, citing a “weak” economic outlook and doubts that the nation will reach deficit- reduction targets. Swatch fell 4.1 percent to 354.4 Swiss francs, the most in three months, after Hayek told Blick newspaper that every 1 centime appreciation of the franc against the dollar cuts 20 million francs ($20.5 million) to 30 million francs from earnings. If the franc gains 10 centimes against the dollar, it would cost the company about 280 million francs, he said. Beatrice Howald, a company spokeswoman, confirmed the comments.

Brazilian Unit

LVMH Moet Hennessy Louis Vuitton SA dropped 2.3 percent to 105.15 euros. The maker of Louis Vuitton bags gets more than half of sales outside of Europe.

Schmolz & Bickenbach AG plunged 14 percent to 24.60 Swiss francs after the steelmaker announced plans to raise 297 million francs ($303 million) selling shares.

Repsol jumped 5.3 percent to 19.90 euros, the highest level in two years. China’s Sinopec will buy new shares in the company’s Brazilian unit and will hold 40 percent of that division after the capital increase. Repsol will also hold the remaining 60 percent stake.

U.K. partner BG Group Plc climbed 3.7 percent to 1,159.5 pence while Sacyr Vallehermoso SA, which owns 20 percent of Repsol, surged 12 percent to 4.93 euros. Galp Energia SGPS SA, Portugal’s biggest oil company, increased 6.6 percent to 13.50 euros.

Accenture Forecast

Cap Gemini SA, Europe’s largest computer services provider, rallied 3.6 percent to 38.14 euros after Dublin-based Accenture Plc, the world’s second-largest technology-consulting firm, forecast net revenue of $5.6 billion to $5.8 billion for the quarter ending November. Analysts had projected $5.62 billion, according to the average of estimates compiled by Bloomberg.

Celesio AG advanced 3.2 percent to 16.47 euros after Exane BNP Paribas raised its recommendation for Europe’s biggest publicly traded drug wholesaler to “outperform” from “neutral.”

Subsea 7 Inc. rallied 3.1 percent to 118.5 kroner after the oil-services company that operates in the North Sea was awarded a $250 million contract by Total E&P UK Ltd. for the Laggan Tormore deepwater gas field development.

---With assistance by Maryam Nemazee in London. Editors: David Merritt, Andrew Rummer.

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