Europe Stocks Drop on Economy Concern, U.S. Fiscal Cliff

U.S. President Barack Obama
Barack Obama, U.S. president. Photographer: Joshua Roberts/Bloomberg

European stocks fell the most in two weeks as the European Commission cut its growth forecast for the region and concern over an impending fiscal crisis in the U.S. increased after the re-election of President Barack Obama.

Randgold Resources Ltd. slumped the most in six months after predicting that its annual output will be at the bottom of its target. Holcim Ltd., the world’s largest cement maker, slid

2.4 percent as earnings missed analysts’ estimates. BNP Paribas SA jumped 1.1 percent after third-quarter net income more than doubled. Hochtief AG advanced 3.1 percent after reiterating full-year profit targets.

The Stoxx Europe 600 Index declined 1.4 percent to 271.04 at the close of trading, erasing an earlier gain of as much as

0.7 percent. The benchmark gauge has still rallied 16 percent from this year’s low on June 4 as central banks around the world reduced borrowing costs and expanded stimulus programs.

“Worries about the state of the European economy are weighing on sentiment,” said Markus Wallner, an equity strategist at Commerzbank AG in Frankfurt. “With regards to the U.S. election, investors may be relieved it’s over, but the fiscal cliff at the end of the year still is the main unsolved problem.”

Brussels-based European Commission today projected the 17-nation euro economy will expand 0.1 percent in 2013, down from a May forecast of 1 percent. It cut the estimate for Germany, Europe’s largest economy, to 0.8 percent from 1.7 percent.

Fiscal Cliff

Stocks earlier advanced as Obama defeated Republican Mitt Romney, winning at least 303 electoral votes in yesterday’s election with 270 needed for the victory. With one state -- Florida -- yet to be decided, Romney had 206 electoral votes.

Automatic tax increases and spending cuts totaling $607 billion will take effect at the start of 2013 unless the Senate, controlled by Democrats, and the Republican-controlled House pass an agreement on avoiding or reducing the changes. The Congressional Budget Office estimates that the U.S. may slip back into recession in the first half of next year if such a compromise is not reached.

National benchmark indexes declined in all of the 18 western European markets today except Denmark. France’s CAC 40 retreated 2 percent, while the U.K.’s FTSE 100 fell 1.6 percent. Germany’s DAX dropped 2 percent.

China Leadership

In China, Vice President Xi Jinping was appointed the secretary general of the 18th Chinese Communist Party Congress, a procedural move that signals he’ll replace President Hu Jintao as head of the party and government in the world’s second-largest economy. The congress will be held Nov. 8-14.

In the euro area, September retail sales decreased more than economists estimated, a report showed today. Sales fell 0.2 percent from August, when they rose 0.2 percent, the European Union’s statistics office in Luxembourg said. Economists had forecast a decline of 0.1 percent.

In indebted Greece, Prime Minister Antonis Samaras faces a test of his fragile coalition government today as he seeks parliamentary approval for austerity measures.

The 238 pages of austerity measures, ranging from raising the retirement age two years to 67 to eliminating Christmas and holiday payments for pensioners, is being debated in the 300-seat Parliament, with a vote expected after 8 p.m. Athens time. Approval of the legislation is the first of the parliamentary votes required by Nov. 12 to obtain a 31 billion-euro ($40 billion) portion of international aid.

Randgold, Holcim

Randgold Resources Ltd. slumped 6.4 percent to 6,950 pence, the sharpest decrease since May 8. The producer of gold in West Africa said full-year output will be at the bottom of its target range of 825,000 ounces to 865,000 ounces. The company also said its costs will increase after power disruptions at the Tongon mine in Ivory Coast.

Holcim slid 2.4 percent to 63.90 Swiss francs after third-quarter net income of 394 million francs ($420 million) missed the 409.8 million-franc analyst estimate in a Bloomberg News survey.

Rhoen-Klinikum AG fell 5 percent to 14.53 euros after the hospital operator said profit this year will be hurt by lower revenue at two hospitals and costs from Fresenius SE’s failed takeover bid. The company already cut its earnings forecast in July. Rhoen-Klinikum also announced a restructuring plan for the two struggling hospitals in Giessen and Marburg.

William Demant Holding A/S declined 5.1 percent to 468.80 kroner, the lowest price in nine months. The Nordic region’s largest maker of hearings aids cut its 2012 profit forecast. The company now sees earnings before interest and taxes “on par with or just short of” the 2011 level, compared with its earlier guidance for an increase.

BNP, Hochtief

BNP Paribas rose 1.1 percent to 39.54 euros. France’s biggest lender said third-quarter profit more than doubled after its investment-banking unit posted higher revenue.

Net income climbed to 1.32 billion euros from 541 million euros a year earlier. That exceeded the 1.06 billion-euro average estimate of eight analysts surveyed by Bloomberg.

Hochtief added 3.1 percent to 39.77 euros, its biggest gain in three weeks. Germany’s largest builder reiterated its full-year profit targets and reported a third-quarter pretax profit of 354.7 million euros, compared with a loss of 101.6 million euros a year earlier.

Alstom SA advanced 1.4 percent to 27.98 euros. The French maker of power equipment and high-speed trains reported first-half earnings that beat analysts’ estimates on higher sales and orders for trains.

Income from operations in the six months ended Sept. 30 rose 12 percent to 703 million euros, the company said. That exceeded the 689 million-euro average of six analyst estimates compiled by Bloomberg. Net income rose 11 percent to 403 million euros, also beating forecasts.

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