European Stocks Drop as Carmakers Slide

European Stock Futures Advance as Hermes, Swiss Re Post Results
The Hermes logo is displayed on a store window, the company is operated by Hermes International SCA in Paris. Photographer: Balint Porneczi/Bloomberg

European stocks fell, extending yesterday’s biggest decline in two weeks, as a selloff in auto manufacturers overshadowed results from Swiss Re Ltd. and Hermes International SCA that beat analysts’ estimates.

PSA Peugeot Citroen SA and Valeo SA both lost more than 4 percent as analysts downgraded their shares. Swiss Re gained 1.9 percent after saying smaller losses from natural disasters helped net income surge in the third quarter. Hermes advanced 2 percent as sales rose because of increased demand in Asia.

The Stoxx Europe 600 Index fell 0.2 percent to 270.58 at the close in London, after earlier climbing as much as 0.6 percent. The gauge has rallied 16 percent from this year’s low on June 4 as European Central Bank President Mario Draghi said he would do everything to protect the single currency and the Federal Reserve opted for a third round of asset purchases.

“I have trouble being very optimistic,” said Matthieu Giuliani, a fund manager at Banque Palatine SA in Paris, which oversees $5.1 billion. “The general tone of company outlooks is cautious. The situation hasn’t changed fundamentally.”

Of the 229 Stoxx 600 companies that have reported earnings this season, about 53 percent have exceeded analysts projections, according to data compiled by Bloomberg. Some 39 companies in the equity benchmark were scheduled to report their results today, data compiled by Bloomberg show.

National benchmark indexes fell in every western-European market except Portugal and Switzerland. France’s CAC 40 retreated 0.1 percent. The U.K.’s FTSE 100 slid 0.3 percent and Germany’s DAX lost 0.4 percent.

Greek Austerity

Greece’s ASE slumped 3.8 percent even as Prime Minister Antonis Samaras obtained a parliamentary majority for a package of austerity measures needed to release further financial aid from the European Union.

The bill on pension, wage and benefit cuts was approved with 153 votes in favor in the 300-seat Parliament early today, according to acting speaker Athanasios Nakos. A total of 128 lawmakers voted against the bill, while 18 abstained and one member was absent.

Stocks declined after an unidentified European Union official said euro-area finance ministers will delay a decision on whether to provide further financial aid to Greece.

The ECB left its benchmark interest rate at a record low of

0.75 percent, as predicted by all but one of 63 economists surveyed by Bloomberg News. Draghi reiterated that the central bank will buy the debt of countries that ask it to intervene in their bond markets.

The Bank of England held its key interest rate at a record low of 0.5 percent.

Automotive Equities

A gauge of auto-related companies fell 1.4 percent, the biggest slide among the Stoxx 600’s 19 industry groups. Peugeot dropped 6.3 percent to 4.46 euros after Citigroup Inc. lowered its recommendation for Europe’s second-biggest carmaker to sell from neutral, citing the company’s struggles with cash.

Valeo declined 4.8 percent to 33.13 euros after UBS AG downgraded France’s second-largest car-parts maker to neutral from buy, saying consensus estimates for European auto suppliers remained too high and all companies will face earnings downgrades.

Pirelli & Cie. lost 2.8 percent to 8.50 euros after brokerages including Exane BNP Paribas said the tiremaker may lower its forecasts. Exane projected sales of 6.1 billion euros ($7.8 billion) in 2012, rather than the current guidance of 6.4 billion euros.

Swiss Re added 1.9 percent to 67.15 Swiss francs after reporting third-quarter net income of $2.18 billion, beating the average analyst estimate of $1.35 billion. The world’s second-biggest reinsurer said it will consider a special dividend if it fails to find an alternative way to deploy its excess capital.

Hermes, Siemens

Hermes gained 2 percent to 223.60 euros after the French maker of Birkin bags and silk scarves said third-quarter sales advanced 24 percent from a year earlier to 848.6 million euros. The average of four analysts’ estimates compiled by Bloomberg had called for 803.8 million euros. Excluding currency swings, sales rose 16 percent. The company also increased its revenue growth target for this year.

Siemens AG added 1.8 percent to 80.27 euros after Europe’s largest engineering company announced that it plans to cut costs by 5 billion euros as it prepares for lower profit.

Alcatel-Lucent SA surged 12 percent to 88.5 euro cents after AT&T Inc. said it will invest $14 billion over three years to improve its telecommunications networks. The short interest on Alcatel is at a one-year high with 16 percent of shares outstanding, according to Markit as of Nov. 6.

Vallourec Advances

Vallourec SA, which produces steel pipes for the oil and gas industry, soared 4.4 percent to 32.98 euros. The company reported third-quarter net income of 62 million euros, beating the average analyst estimate of 60.7 million euros.

Cable & Wireless Communications Plc rallied 5.8 percent to 38 pence, its biggest rally in five months. The provider of phone services in the Caribbean reported first-half earnings before interest, taxes, depreciation and amortization of $445 million, exceeding the average analyst estimate of $442 million.

JCDecaux SA slid 6.1 percent to 16.03 euros. The French outdoor-advertising company forecast that like-for-like revenue will decline in the fourth quarter.

Eurasian Natural Resources Corp. retreated 3.4 percent to

294.6 pence. The producer of metals in Kazakhstan said sales in the first nine months slumped as the price for iron ore declined 26 percent and ferroalloys fell 8 percent.

Balfour Beatty

Balfour Beatty Plc sank 18 percent to 250.1 pence, for the largest decline on the Stoxx 600. The U.K.’s biggest building company forecast that profit margins will slip this year because of a lack of building work in Britain. The company also said that its order book decreased 4 percent to 14.4 billion pounds ($23 billion) in the three months through September.

G4S Plc slid 3.1 percent to 259.2 pence. The security provider lost the contract to run the Wolds Prison in Yorkshire in the U.K. The jail will return to the public sector in 2013.

Delta Lloyd NV plunged 4.1 percent to 11.87 euros after the Dutch insurer forecast profit will drop 10 percent in 2012 if interest rates remain at their current levels.

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