European Stocks Fall, Extending Weekly Drop; BHP, Temenos Slide

European Stocks Slide
Traders work at computer screens inside the Frankfurt Stock Exchange. Photographer: Hannelore Foerster/Bloomberg

European stocks fell as U.S. consumer sentiment unexpectedly declined and investors speculated that stress tests on Europe’s banks may show they have insufficient capital to weather the fiscal crisis.

BHP Billiton Ltd., the world’s largest mining company, lost 1.9 percent after agreeing to acquire Petrohawk Energy Corp. for $12.1 billion. Temenos Group AG plunged 20 percent after cutting its license-revenue forecast. Hugo Boss AG advanced 6.7 percent as the German luxury-clothing company raised its outlook.

The Stoxx Europe 600 Index dropped 0.3 percent to 266.91 at the 4:30 p.m. close in London. The gauge retreated 2.5 percent this week, the biggest decline in four months, amid concern that the sovereign-debt crisis in Europe will spread from Greece to the larger economies of Italy and Spain. The measure has recorded only one weekly gain since the end of April.

“We are experiencing a soft patch of growth,” Bernd Meyer, head of cross-asset strategy at Commerzbank AG, said in a phone interview from Frankfurt. “There should be scope for positive surprise on earnings and the economy later this year and valuations are still attractive. It remains to be seen if we have seen the bottom of this weaker macro news flow.”

The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment fell to a two-year low of 63.8 in July from 71.5 the prior month. The gauge was projected to rise to 72.2, according to the median forecast of 62 economists surveyed by Bloomberg News.

U.S. Economy

Separate U.S. data showed industrial production rose less than forecast and manufacturing in the New York region unexpectedly contracted.

National benchmark indexes dropped in 14 of the 18 western European markets today. France’s CAC 40 Index lost 0.7 percent and the U.K.’s FTSE 100 lost 0.1 percent, while Germany’s DAX gained 0.1 percent.

Eight banks failed the European Union’s stress tests after regulators said they had a combined capital shortfall of 2.5 billion euros ($3.5 billion), according to results released after the close of European equity markets. All lenders in Germany, France, Sweden and the U.K. passed the tests.

“The release of the European banking stress tests keeps investors nervous,” Kai Fachinger, who manages more than $1 billion in equities at SAM Sustainable Asset Management AG in Zurich, said before the results were made public. “The market is afraid of negative surprises.”

Debt Ceiling

Treasury Secretary Timothy F. Geithner warned there’s no possible extension to the time limit to raise the debt ceiling as S&P joined Moody’s Investors Service in reviewing the U.S.’s top credit rating late yesterday. The long-term rating may be lowered by one or more notches into the AA category in the next three months if S&P concludes Congress and President Barack Obama’s administration haven’t achieved a credible solution to the government debt burden and aren’t likely to achieve one in the foreseeable future, according to a statement late yesterday.

BHP Billiton retreated 1.9 percent to 2,340 pence after the mining company agreed to acquire Houston-based Petrohawk Energy for about $12.1 billion in cash in its biggest acquisition, betting natural gas demand will gain in the U.S.

Temenos plunged 20 percent to 18 Swiss francs, the biggest drop since January 2009. The banking software provider reduced its full-year outlook for license revenue, saying it expects like-for-like growth of 5 percent to 10 percent.

Logitech Falls

Logitech International SA, the world’s biggest maker of computer mice, slid 2.6 percent to 8.09 francs as a gauge of technology companies was among the worst performers of the 19 industry groups in the Stoxx 600. STMicroelectronics NV, Europe’s largest chipmaker, retreated 3.5 percent to 6.29 euros and Infineon Technologies AG lost 2.4 percent to 7.27 euros.

Electrocomponents Plc, the world’s largest distributor of electronics and maintenance products, dropped 2.3 percent to 238.7 pence after the company said global demand for electronics started to slow in June.

SGS AG, the world’s largest goods inspection company, sank 6.9 percent to 1,470 francs after reporting first-half sales of 2.3 billion francs ($2.8 billion), missing analysts’ estimates.

Waertsilae Oyj plunged 12 percent to 20.10 euros, its biggest drop in almost three years. The world’s largest maker of ship engines and power plants forecast full-year sales will decline as much as 5 percent amid weaker marine-service markets.

Hugo Boss

Hugo Boss preferred stock jumped 6.7 percent to 77 euros as the company raised its full-year forecast after second-quarter net income jumped more than fivefold to 31 million euros. It now forecasts an increase in 2011 sales of between 15 and 17 percent after adjustments for currency effects, compared with a previous forecast of 12 percent.

Petroleum Geo-Services ASA, the world’s third-largest surveyor of oil and natural-gas fields, rallied 8.9 percent to 81.20 kroner after saying it expects to report second-quarter results that are higher than current analyst projections. TGS Nopec Geophysical Co. surged 5.9 percent to 157.20 kroner, its highest price since at least 1997.

FirstGroup Plc, Britain’s biggest train operator, rose 6.3 percent to 350.6 pence, the largest gain since October, after saying first-quarter trading was in line with forecasts, buoyed by improving trends at its U.K rail and U.S. bus businesses.

Automakers limited losses in the Stoxx 600 as Bayerische Motoren Werke AG, the world’s largest producer of luxury vehicles, climbed 2.4 percent to 72.67 euros after Citigroup Inc. analysts including John Lawson said they expect half year records by German auto companies.

“Second-quarter 2011 is likely to prove exceptionally profitable for German auto companies,” the analysts wrote in a note to clients today. Porsche SE preferred shares rose 1.9 percent to 56.63 euros.

Volkswagen AG added 2.9 percent to 151 euros as Europe’s largest carmaker said it expects to continue outperforming the auto market in the second half of the year after posting a record 4.1 million deliveries in the first six months.

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