European stocks retreated for a second day as companies from BP Plc to UBS AG reported earnings that missed analysts’ estimates and concern grew that U.S. lawmakers may fail to increase the nation’s debt limit.
BP, Europe’s second-biggest oil company, and UBS, Switzerland’s largest bank, slid more than 2.5 percent. STMicroelectronics NV, Europe’s biggest semiconductor maker, sank the most in almost 10 years after saying there will be a “correction” in sales.
The benchmark Stoxx Europe 600 Index slid 0.4 percent to 270.08 at the 4:30 p.m. close in London. The gauge has retreated 7.2 percent from this year’s high in February amid concern that Europe’s fiscal crisis will derail the economic recovery and speculation that U.S. lawmakers will fail to agree on increasing the nation’s debt ceiling by next week’s deadline.
“It will be a very mixed earnings season and the second half of the year is a bit more cloudy than some people expected,” said Heinz-Gerd Sonnenschein, an equity strategist at Deutsche Postbank AG in Bonn. “It’s a difficult situation for European banks at the moment because of the risk aversion of market participants.”
President Barack Obama warned yesterday of a “deep economic crisis” without a compromise to avert a U.S. default as he dueled Republican House Speaker John Boehner in back-to back speeches on increasing the debt limit.
The U.S. Treasury Department may still have enough cash to pay the government’s bills for days or even weeks if Congress fails to increase the debt limit before the Aug. 2 deadline, say analysts at UBS AG and Barclays Plc. Both Standard & Poor’s and Moody’s Investors Service are weighing a reduction of the U.S. credit rating.
“If we get the downgrade from S&P, which seems inevitable at this point, that could very well have negative long term implications for equities,” Barry Knapp, an equity strategist at Barclays in New York, said in a Bloomberg television interview.
National benchmark indexes dropped in 11 of the 18 western European markets. France’s CAC 40 declined 0.7 percent and Germany’s DAX Index was little changed. The U.K.’s FTSE 100 advanced 0.1 percent as a report showed the country’s economy grew 0.2 percent in the second quarter, matching the median forecast in a Bloomberg survey.
BP, UBS Drop
BP slid 2.6 percent to 463.25 pence after the company reported profit adjusted for one-time items and changes in inventory that missed analyst estimates.
UBS lost 2.9 percent to 13.50 Swiss francs after saying second-quarter net income fell to 1.02 billion francs ($1.27 billion) from 2.01 billion francs in the year-earlier period. That missed the 1.29 billion-franc mean estimate of 14 analysts surveyed by Bloomberg.
STMicroelectronics plunged 12 percent to 5.69 euros in Milan, the biggest drop since 2001, as Chief Executive Officer Carlo Bozotti said there will be a “correction” in sales and gross margin in the third quarter because of difficulties at customer Nokia Oyj.
Kesko Oyj, Finland’s biggest retailer, fell 7.3 percent to 28.34 euros, its lowest price in a year, after reporting second-quarter net income of 54 million euros, missing analysts’ estimates of 59 million euros.
Groupe SEB SA sank 6.3 percent to 68.23 euros, the biggest decline in almost two years. The world’s largest maker of countertop kitchen appliances said first-half profit was 93 million euros compared with 89 million euros a year earlier.
The results were “well below expectations,” Denis Moreau and Julie de Vigneral, analysts at UBS AG, wrote in a report. “SEB is exposed to raw materials prices volatility that may affect profitability.”
Norsk Hydro ASA, Europe’s third-largest aluminum producer, climbed 2.2 percent to 39.76 kroner as the company reported second-quarter net income of 1.41 billion kroner ($263 million), beating the 1.07 billion-krone average of 11 analysts’ estimates compiled by Bloomberg.
BG Group Plc rallied 4.3 percent to 1,486.5 pence, the highest since May. The U.K.’s third-biggest oil company said second-quarter profit doubled to $1.24 billion as prices for oil and gas and production rose.
Societe Television Francaise 1 surged 7.5 percent to 13.68 euros, the largest increase in 14 months, after the owner of France’s most-watched TV channel said first-half net income rose 60 percent to 118.6 million euros ($172 million).
Royal KPN NV advanced 3.2 percent to 10.15 euros as the biggest Dutch phone company reiterated its forecast that earnings before interest, taxes, depreciation and amortization will be more than 5.3 billion euros in 2011.
SAP AG rallied 3.6 percent to 43.49 euros as the world’s largest maker of business-management software boosted its full-year outlook.