European Stocks Drop on China Manufacturing Report

European Stocks Decline Third Day in Four on China Manufacturing
A financial trader uses a telephone as he works at his computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks declined for the third time in four days after a report signaled that Chinese manufacturing will contract for an 11th month, adding to concern the global economic slowdown is deepening.

A gauge of mining companies posted the biggest drop of the 19 industry groups in the benchmark Stoxx Europe 600 Index. Daimler AG lost 2 percent after saying earnings will fall at its Mercedes Benz Cars business. Telenet Group Holding NV surged 13 percent after Liberty Global Inc. made a $2.5 billion offer to buy the rest of the communications company.

The Stoxx 600 slipped 0.2 percent to 274.5 at the close, while the Euro Stoxx 50 gauge of the biggest companies in the euro area dropped 0.6 percent. The Stoxx 600 has still climbed 17 percent from this year’s low on June 4 as European Central Bank policy makers agreed to implement an unlimited bond-buying program and the Federal Reserve unveiled its third round of asset purchases.

“What happened with the central banks was necessary, but not yet sufficient to really get us out of the crisis we’ve been in over the last couple of years,” Norman Villamin, chief investment officer for Europe at Royal Bank of Scotland Group Plc’s Coutts & Co. unit, said in a Bloomberg Television interview. “What we really need is growth, and we think we need to see more on the fiscal side. Without that, the markets are going to have a hard time really continuing significantly higher from here.”

China’s Manufacturing

China’s manufacturing industry will contract in September, according to the preliminary reading of a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics. The result of 47.8 compared with a final 47.6 last month. A reading above 50 indicates expansion.

A composite index for services and manufacturing activity in the euro area fell in September more than economists had projected. The PMI slipped to 45.9, its lowest since June 2009, from 46.3 last month. The median estimate of economists surveyed by Bloomberg had called for a reading of 46.6.

France’s manufacturing industry will contract this month more than economists had forecast, according to a PMI released today. The measure showed a preliminary reading of 42.6 for September, less than the median economist estimate of 46.4 in a Bloomberg News survey.

National benchmark indexes declined in 12 of the 18 western-European markets. Germany’s DAX slid less than 0.1 percent, while the U.K.’s FTSE 100 and France’s CAC 40 each dropped 0.6 percent.

Greece’s ASE Index climbed 1.4 percent, after earlier rallying as much as 3.8 percent. The leaders of the country’s governing coalition continued to discuss a proposed 11.5 billion-euro ($14.9 billion) package of budget cuts. Finance Minister Yannis Stournaras called the talks difficult.

BHP Billiton

BHP Billiton Ltd. and Anglo American Plc declined 2.3 percent to 1,954.5 pence and 4.4 percent to 1,944 pence, respectively, contributing the most to a retreat by a gauge of mining companies following the Chinese manufacturing report.

Vedanta Resources Plc, India’s largest copper producer, fell 2.4 percent to 1,054 pence. Evraz Plc, the mining company and steelmaker partly owned by billionaire Roman Abramovich, slumped 6 percent to 260.8 pence.

Lonmin Plc plunged 6.3 percent to 610.5 pence after a labor analyst said that the platinum producer’s pay increase for workers at its Marikana mine sets a negative precedent for employers in South Africa. The miners agreed to return to work today after Lonmin offered to raise their wages by as much as 22 percent and pay them a one-off bonus.

“The lesson that workers have learnt is that violence and intimidation lead employers to capitulate,” said Loane Sharpe at Adcorp Holdings Ltd. by phone yesterday. “It sets a very dangerous precedent.”

Daimler Declines

Daimler retreated 2 percent to 39.23 euros as the world’s third-largest luxury vehicle maker said earnings from its car division will drop in the second half of 2012. Bayerische Motoren Werke AG, the biggest manufacturer of luxury cars, lost 2.9 percent to 59.44 euros.

PSA Peugeot Citroen slipped 3.3 percent to 6.64 euros after its debt rating was cut to three levels below investment grade by Fitch Ratings late yesterday in the latest sign of deteriorating finances at Europe’s second-biggest carmaker. A union leader said that Peugeot and France’s President, Francois Hollande, will discuss ways of reducing the number of redundancies that the carmaker had planned to make.

Pirelli, Mediobanca

Pirelli & Cie. fell 3.2 percent to 8.94 euros. Citigroup Inc. lowered the world’s fifth-largest tire maker to neutral from buy. Nokian Renkaat Oyj dropped 3.3 percent to 33.08 euros as the brokerage cut the Nordic tire manufacturer to sell from neutral.

Mediobanca SpA sank 3.6 percent to 4.08 euros. Italy’s biggest publicly traded investment bank reported a quarterly loss as writedowns of equity holdings and other securities outweighed a one-off gain from the sale of a stake in a highway management company in Chile.

Erste Group Bank AG slumped 4 percent to 18.12 euros. UBS AG cut eastern Europe’s third-biggest western lender to neutral from buy, citing the 39 percent rally by its shares from the beginning of this year through yesterday.

Electrolux AB, the world’s second-largest appliance maker, fell 3.6 percent to 165.20 kronor. The shares surged 56 percent this year through yesterday’s close.

“I think it’s pure profit taking,” said Anders Trapp, an analyst at SEB AB in Stockholm. “This week there have been some minor news that could be interpreted negatively, and this creates profit taking for a share that has performed extremely well this year.”

Telenet surged 13 percent to 35.20 euros, its biggest gain in almost four years. Liberty Global, the John Malone-led cable-TV company, offered to buy 49.6 percent of the Belgian business. Englewood, Colorado-based Liberty will give Telenet investors 35 euros a share.

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