Most European Stocks Drop on Spain Debt, U.S. Confidence

Most European Stocks Gain Before Debt Auctions
30mg tablets of Shire Plc's Adderall XR. Shire gained 1.7 percent to 1,773 pence. Societe Generale SA and Berenberg Bank each upgraded their recommendations on the drugmaker to buy from hold. The shares plunged the most in more than nine years yesterday as U.S. drug regulators unexpectedly approved a copycat version of Shire’s second-biggest selling drug. Photographer: JB Reed/Bloomberg

Most European stocks declined as demand fell at a Spanish debt auction, U.S. consumer confidence sank to a five-month low and Germany criticized European Union proposals to address the financial crisis for putting too much emphasis on debt sharing.

Infineon Technologies AG tumbled the most in three years after cutting its sales forecast. Bayerische Motoren Werke AG slid 2.3 percent as Citigroup Inc. downgraded the world’s biggest maker of luxury vehicles. Stagecoach Group Plc gained 5.5 percent after earnings beat analysts’ estimates.

The Stoxx Europe 600 Index fell 0.1 percent to 242.6 at the close of trading, as two shares declined for each that increased. The measure fluctuated between gains and losses at least 20 times today. The gauge has fallen 2.8 percent over the past four days as EU leaders prepared to begin a two-day summit in Brussels on June 28, the 19th meeting since the euro-region debt crisis broke out in early 2010.

“Stocks have ended in a soft manner today with clients holding back from taking on risk ahead of the EU summit later this week,” Ishaq Siddiqi, a market strategist at ETX Capital in London, wrote in note. “Worries that leaders are set to disappoint continue to grow, as Germany refrains from its stance on euro bonds.”

Merkel Unhappy

German Chancellor Angela Merkel told members of her Christian Democratic bloc that she is unhappy with proposals drawn up by European Union President Herman Van Rompuy for the EU summit, a party official who was present at the meeting said. The plan has the wrong balance between shared liability and sharing control, Merkel told lawmakers, according to the official, who spoke on condition of anonymity because the meeting was held in private.

The Stoxx 600 has fallen 2.8 percent from its 2012 high on March 16, bringing the drop in the first six months of the year to 0.8 percent, amid concern that Greece will be forced to leave the euro.

National benchmark indexes retreated in 13 of the 18 western European markets today. The U.K.’s FTSE 100 slipped 0.1 percent and France’s CAC 40 slid 0.3 percent. Germany’s DAX Index advanced 0.1 percent.

Demand declined and yields rose at an auction of Spanish debt. Spain sold three-month bills at an average 2.362 percent, compared with 0.846 percent at the last auction on May 22, and six-month bills at an average rate of 3.237 percent, compared with 1.737 percent last month. Demand for the three-month securities was 2.6 times the amount sold, compared with 3.95 times in May, while the bid-to-cover ratio for the six-month bills was 2.82 compared with 4.3.

‘Cautious’ Investors

“The market is very focused on the spread so is taking this negatively,” said Arnaud Scarpaci, a fund manager at Agilis Gestion SA in Paris, referring to the Spanish sale. “It’s difficult to appreciate that yield so investors are cautious.” Agilis Gestion oversees about $84 million.

Confidence among U.S. consumers sank to a five-month low in June as Americans became less sanguine about the outlook for the labor market and incomes. The Conference Board’s index dropped to 62 from a revised 64.4 in the prior month, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg called for a reading of 63.

Infineon, Europe’s second-largest semiconductor maker, tumbled 12 percent to 5.35 euros, its biggest drop since March 2009. The company lowered its third-quarter sales forecast to a “slight decline” from the previous quarter. The company previously forecast revenue would be little changed.

Aixtron, BMW

Aixtron SE, a maker of equipment for the semiconductor industry, slipped 2.8 percent to 10.58 euros as UBS AG reduced its share-price estimate by 14 percent to 12 euros.

BMW lost 2.3 percent to 53.70 euros as Citigroup cut its recommendation on the shares to neutral from buy, citing more challenging automobile markets. A gauge of automakers had the second-biggest decline of the 19 industry groups in the Stoxx 600. Daimler AG lost 1.4 percent to 33.40 euros and Fiat SpA fell 2.9 percent to 3.63 euros.

Bankia SA led declines in Spanish banks, falling 8.7 percent to 87.6 euro cents. Banco Popular Espanol SA dropped 7.1 percent to 1.72 euros while Banco de Sabadell SA slid 5.3 percent to 1.50 euros.

Moody’s Investors Service cut the ratings of 28 Spanish lenders because of the country’s sovereign debt and souring real estate loans.

Stagecoach, Shire

Stagecoach, the operator of Britain’s busiest commuter-train service, advanced 5.5 percent to 263.5 pence. The company reported earnings that exceeded analysts’ estimates, increased its final dividend and said the outlook for its bus and rail operations is positive.

Shire Plc advanced 3.2 percent to 1,798 pence as analysts advised buying the U.K. drugmaker after yesterday’s 11 percent plunge. Societe Generale SA and Berenberg Bank each upgraded their recommendations on the drugmaker to buy from hold after the shares sank the most in more than nine years yesterday as U.S. drug regulators unexpectedly approved a copycat version of Shire’s second-biggest selling drug.

Yara International ASA rallied 5.8 percent to 249.40 kroner. The world’s largest publicly traded nitrogen-fertilizer maker advanced on speculation that dry weather in the U.S. will boost demand for crop nutrients.

Harvest “expectations are being reduced for this year” as production of corn and other crops is hindered by “very dry weather and high temperatures” in the U.S., boosting fertilizer demand, Patrick Lambert, an analyst at Societe Generale, said by phone from Paris.

Adecco SA advanced 3 percent to 38.40 Swiss francs after saying it plans to buy back shares worth as much as 400 million euros ($500 million).

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