European Stocks Decline as U.S. Payrolls Trail Estimates

An Employee Holds A Bayerische Motoren Werke AG Badge
Daimler AG and Bayerische Motoren Werke AG led automakers lower. Photographer: Guenter Schiffmann/Bloomberg

European stocks fell to a five-month low as reports showed U.S. payrolls increased at the slowest pace in a year and the unemployment rate unexpectedly rose, adding to weakening economic data from China and the euro area.

Daimler AG and Bayerische Motoren Werke AG fell more than 3.5 percent, leading automakers lower. BP Plc gained 1.8 percent after it said it will pursue the sale of its 50 percent holding in TNK-BP, Russia’s third-largest oil producer.

The Stoxx Europe 600 Index declined 1.9 percent to 235.09 at the close of trading in London, completing a weekly loss of 3.1 percent. The benchmark measure slumped 6.8 percent in May as concern mounted that Greece will leave the euro area and Spain’s borrowing costs increased.

“It’s not a good day for the bulls,” said Philippe Gijsels, a market research analyst at BNP Paribas Fortis Capital Markets in Brussels. “The slowdown is global. We are seeing it everywhere from Europe to China and now in the U.S. that had seemed a little bit immune so far. Risky assets are coming down and safe havens are doing even better.”

U.S. payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.

Euro Area, China

Euro-area unemployment reached the highest on record as a deepening economic slump and budget cuts prompted companies from Spain to Italy to cut jobs.

The jobless rate was at 11 percent in April and March, the European Union’s statistics office said. That’s the highest since the data series started in 1995 and in line with the median forecast in a Bloomberg survey. The March figure was revised up to 11 percent from 10.9 percent.

China’s Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April, the nation’s statistics bureau and logistics federation said. That compared with the 52 median estimate in a Bloomberg News survey of economists. A reading above 50 indicates expansion. A separate gauge from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction, the longest since the global financial crisis.

In The U.S. the Institute for Supply Management’s factory index fell to 53.5 in May from 54.8 a month earlier, the Tempe, Arizona-based group’s report showed today. The median forecast of economists surveyed by Bloomberg News called for a drop to 53.8.

National benchmark indexes fell in all of the 18 western European markets today. Germany’s DAX dropped 3.4 percent, the U.K.’s FTSE 100 slid 1.1 percent, while France’s CAC 40 declined 2.2 percent.

Greek Elections

In Greece, two opinion polls published today showed the New Democracy party, which backs austerity measures, leading left-wing group Syriza, which opposes them. Two other polls showed Syriza in the lead before the June 17 elections.

A report showed U.K. manufacturing shrank last month at the fastest pace since the depths of the financial crisis in 2009. A gauge of factory output dropped to 45.9 from 50.2 in April, Markit Economics said.

Preferred shares of Volkswagen AG dropped 4.1 percent to 123.75 euros, its third day of declines. Daimler and BMW fell 5.1 percent to 35.52 euros and 3.9 percent to 58.72 euros, respectively. A gauge of automakers was the worst performer of the 19 industry groups on Stoxx 600.

Anheuser-Busch InBev NV, the world’s biggest brewer, fell 3.2 percent to 53 euros after the Brazilian government raised beer taxes more than anticipated.

AB InBev owns Cia. de Bebidas das Americas, Brazil’s biggest brewer and gets about 30 percent of its earnings before interest and taxes from the country.

Swiss Watchmakers

Swatch Group AG and Cie. Financiere Richemont SA fell 4.7 percent to 355.90 francs and 6.1 percent to 52 francs as China’s manufacturing slowdown raised concerns that demand for Swiss watches will decline in the country.

Eurocommercial Properties NV, the Dutch owner of shopping centers in France and Italy, fell 4.1 percent to 25.37 euros. JPMorgan Chase & Co. downgraded its recommendation on the stock to neutral, the equivalent of hold, from overweight.

Tenaris SA, the world’s largest maker of seamless steel pipes, slid 5.4 percent to 12.19 euros, its lowest in six months. The stock was cut to underperform from neutral at Credit Suisse Group AG.

K+S AG, Europe’s biggest potash distributor, retreated 3.8 percent to 31.02 euros after Nomura Holdings Inc. cut its estimate for the company’s 2012 earnings per share by 12 percent.

BP gained 1.8 percent to 402 pence. The company said it had notified its partners in TNK-BP of its intention to look at a sale of its stake. There can be no guarantee that any transaction will take place, BP said.

HMV rallied 17 percent to 3.99 pence after it agreed to sell London concert venue Hammersmith Apollo Ltd. to Stage C Ltd. for 32 million pounds ($49 million) in cash.

Assicurazioni Generali SpA gained 3.4 percent to 8.49 euros. Mediobanca SpA is seeking to remove Generali’s Chief Executive Officer Giovanni Perissinotto because the investment bank wants to improve the performance of Italy’s biggest insurer, two people familiar with the situation said.

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