European Stocks Sink to Three-Month Low on Fiscal Cliff

Europe Stock Futures Little Changed Before U.S. Fiscal Talks
A pedestrian passes the Reckitt Benckiser Plc headquarters in Slough, U.K. Reckitt Benckiser will offer to buy Schiff Nutrition International Inc. in a deal that values the maker of vitamins, supplements and nutrition bars at about $1.4 billion, topping a bid from Bayer AG. Photographer: Chris Ratcliffe/Bloomberg

European stocks sank to a three-month low as U.S. President Barack Obama held talks with Republican lawmakers on the so-called fiscal cliff and fighting between Israel and Hamas escalated.

Natixis led a drop in banks, sliding 4.7 percent. Melrose Plc plunged 11 percent as revenue growth slowed. Henkel AG & Co. KGaA retreated the most in a more than year as the chemical maker’s sales missed projections. Royal Boskalis Westminster NV jumped 5.3 percent after raising its profit forecast.

The Stoxx Europe 600 Index declined 1 percent to 262.86 at the close of trading, the lowest since Aug. 2. The measure has lost 4.3 percent since Obama’s re-election on Nov. 6 as traders turned their focus to the $607 billion of tax increases and spending cuts that come into force next year if Congress doesn’t act. The gauge has retreated 2.7 percent this week for the biggest decline in five months.

“Investors’ attention is focused on the meeting between lawmakers in the U.S. today to discuss the fiscal cliff,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva, which oversees about $26 billion. “If they can’t agree in the coming days, we would be in a similar situation as last year when Republicans and Democrats couldn’t agree on raising the debt ceiling. General expectation is that they’ll come to an agreement in the last minute, but until then markets will be nervous and rather shaky.”

National benchmark indexes fell in all 18 western European markets, except Greece and Iceland. The U.K.’s FTSE 100 and Germany’s DAX Index sank 1.3 percent. France’s CAC 40 Index slipped 1.2 percent.

Israel Tension

Stocks extended losses as Hamas fired rockets at Jerusalem and Tel Aviv and Israel expanded its bombing of the Gaza Strip. The escalating conflict threatens a region still unbalanced after a wave of popular uprisings last year, including one in Israel’s neighbor Syria that has turned into a civil war. Hundreds of thousands of protesters staged demonstrations from Cairo to Tehran and Istanbul to denounce Israel’s attacks.

“The situation in Israel doesn’t help at all,” said Richard Bonnor-Moris, head of multi-asset allocation at Newscape Capital Group Ltd. in London, which oversees about $600 million. “Any kind of tensions in that region that do end up forcing the price of oil higher is particular bad for growth.”

Crude for January delivery gained 1.5 percent to $87.14 a barrel on the New York Mercantile Exchange.

Budget Talks

Obama held his first face-to-face talks with House Speaker John Boehner since the presidential election today. He also hosts House Minority Leader Nancy Pelosi, a California Democrat, Senate Majority Leader Harry Reid, a Nevada Democrat, and Senate Minority Leader Mitch McConnell, a Kentucky Republican. Obama’s insistence on higher taxes for top earners and Republicans’ refusal to raise rates leaves negotiators with arithmetically complex and politically fraught choices.

Today’s meeting featured the same people who failed to reach an agreement during debt-ceiling talks in 2011. Obama leaves for Asia tomorrow and Congress is departing Washington until Nov. 26 for the Thanksgiving recess. After European markets closed, Boehner said the talks with Obama were “constructive.”

Industrial production in the U.S. unexpectedly declined in October as superstorm Sandy knocked out power in the Northeast. Output at factories, mines and utilities dropped 0.4 percent last month after a revised 0.2 percent increase in September that was smaller than previously estimated, Federal Reserve data showed today. Economists forecast a 0.2 percent gain, according to the Bloomberg survey median.

ECB Action

The Stoxx 600 has erased all the gains that followed the European Central Bank’s Sept. 6 announcement of unlimited bond buying to bring down borrowing costs in the region’s weakest economies. The number of shares changing hands today was 13 percent greater than the 30-day average, according to data compiled by Bloomberg.

Stoxx 600 bank shares fell 1.9 percent for the worst performance among the 19 industry groups. Paris-based Natixis sank 4.7 percent to 2.30 euros. Commerzbank AG, Germany’s second-largest lender, lost 5 percent to 1.24 euros and Banco Espirito Santo SA retreated 5.9 percent to 73 euro cents.

Melrose slid 11 percent to 208.9 pence, the largest drop since August 2011. The London-based company that acquires engineering businesses said revenue growth in the period since July 1 has slowed compared with the first half of the year and the outlook for 2013 has become more uncertain.

Henkel Drops

Henkel fell 4.7 percent to 58.41 euros, the largest decline since Sept. 22, 2011. The German maker of Loctite glues and Persil detergent reported third-quarter so-called organic revenue growth of 2.5 percent, falling short of the 3.4 percent average analyst estimate.

De’Longhi SpA tumbled 12 percent to 9.23 euros, the largest decline on record. The main shareholder in the Italian maker of appliances sold 11.96 million shares, or 8 percent of total stock outstanding. De Longhi Soparfi SA, controlled by the De Longhi family, sold the holding at 9.50 euros a share.

SBM Offshore NV retreated 6.5 percent to 8.12 euros, extending yesterday’s 13 percent slide. Societe Generale SA cut its share-price estimate for the world’s biggest supplier of floating oil platforms to 9.30 euros from 13 euros.

Telecom Italia SpA fell 4.7 percent to 68 euro cents after Il Sole 24 Ore said Italy’s biggest phone carrier may call off the possible spinoff of its fixed-line network.

Royal KPN NV, the former Dutch phone monopoly, slid 7.1 percent to 4.03 euros, the lowest price in a decade. Sanford C. Bernstein & Co. cut its recommendation on the stock yesterday, and KPN’s chief executive officer said it may temporarily accept a lower credit rating.

Boskalis Rallies

Boskalis, the largest dredging company, jumped 5.3 percent to 29.82 euros in Amsterdam for the best performance in the Stoxx 600. The company raised its 2012 net income forecast to a range of 230 million euros to 245 million euros. It earlier forecast profit of 210 million euros to 230 million euros. Boskalis also said it’s in talks after being approached by a party in the Middle East to sell its 40 percent stake in coastal-infrastructure company Archirodon.

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