European Stocks Drop on Bernanke’s Fiscal-Cliff Warning

European stocks fell from an 18-month high as Federal Reserve Chairman Ben S. Bernanke said the central bank’s plan to buy $45 billion a month of Treasuries will fail to offset the effects of the fiscal cliff.

Deutsche Bank AG slid 2.7 percent after Germany’s biggest lender said fourth-quarter profit will fall short of estimates. Centamin Plc tumbled 47 percent after a fuel dispute halted production at its gold mine in Egypt. Volvo AB retreated 4.3 percent as Renault SA sold its remaining stake in the Swedish truckmaker to increase funding.

The Stoxx Europe 600 Index lost 0.4 percent to 279.63 at the close, its first decline this month. The equity benchmark has still increased 14 percent in 2012, closing at the highest level since May 2011 yesterday, as the European Central Bank pledged to buy the bonds of nations who seek aid.

“What Bernanke said is true: the extension of the program can’t offset the fiscal drag,” said Konstantin Giantiroglou, head of investment advisory at Neue Aargauer Bank in Brugg, Switzerland. “Interest rates are already very low and any additional monetary stimulus is marginal. All the focus is still on the ongoing negotiation between the U.S. government and the majority leader of the House of Representatives. The sentiment is still cautious.”

National benchmark indexes retreated in 11 of the 18 western European markets. The U.K.’s FTSE 100 slid 0.3 percent and Germany’s DAX declined 0.4 percent. France’s CAC 40 decreased 0.1 percent.

Asset Purchases

U.S. stocks initially climbed yesterday after the Fed said it will buy Treasury securities every month from January to help stimulate the economy. The rally faded as Bernanke said monetary stimulus cannot offset the so-called fiscal cliff, the more than $600 billion package of tax increases and spending cuts that will come into force early next year if politicians fail to agree on a new federal budget.

White House and congressional officials warned their staff that they may have to spend the holidays at their desks in Washington, as both sides publicly refused to budge from their positions on taxes and spending. Lawmakers from the Republicans and the Democrats expressed renewed pessimism yesterday that they will reach a deal before the end of the year.

Banking Union

European Union finance ministers agreed to put the European Central Bank in charge of all large euro-area lenders. About 200 banks will qualify for oversight by the ECB rather than national regulators, Financial Services Commissioner Michel Barnier said in Brussels today.

At a separate meeting, euro-area ministers approved a 49.1 billion-euro ($64 billion) installment of aid to Greece. The payment forms part of the nation’s two bailouts from the EU and the International Monetary Fund. The leaders of the 27 member states began a two-day summit today.

In the U.S., initial claims for unemployment insurance payments declined last week more than forecast to their lowest level since early October. Retail sales rose in November.

Deutsche Bank lost 2.7 percent to 33.35 euros after saying that increased restructuring costs will cause the bank to miss profit forecasts this quarter. The average of four analyst estimates compiled by Bloomberg had predicted net income of 509.8 million euros.

UBS AG dropped 1.1 percent to 15.08 Swiss francs after a person familiar with the matter said U.S. and U.K. regulators may fine Switzerland’s biggest bank more than $1 billion for trying to rig global interest rates. The final figure may still change, three people familiar with the investigations said.

Centamin Slumps

Centamin tumbled 47 percent to 27.7 pence, its biggest drop since its initial public offering in 2001. The company said that Egyptian General Petroleum Corp. will not supply it with diesel for the Sukari gold mine until it pays a bill for $65 million. Centamin called the claim illegal.

Volvo declined 4.3 percent to 91.85 kronor after Renault sold its remaining stake in the Swedish truck maker for 12.8 billion kronor ($1.9 billion). The French carmaker disposed of a 6.5 percent holding, saying it would use the proceeds to reduce debt and invest in France, Russia and China. Renault’s shares climbed 1.5 percent to 40.22 euros.

BG Group Plc slipped 1.7 percent to 1,047 pence. The company appointed Chris Finlayson to succeed Frank Chapman, the chief executive officer who transformed the U.K.’s former state-owned gas driller into a global producer.

AstraZeneca Plc dropped 2.8 percent to 2,958.5 pence, contributing the most to the Stoxx 600’s decline, after the company said that its fostamatinib drug, an oral treatment for rheumatoid arthritis, failed to meet one of the main objectives in a study.

TomTom NV, the Dutch supplier of maps for Apple Inc.’s iPhone 5, slid 3.2 percent to 3.93 euros. Google Inc. unveiled its own mapping application the iPhone, iPad and other iOS devices, making the software available for free in more than 40 countries and 29 languages.

Hochtief AG advanced 2.1 percent to 43.47 euros after Germany’s biggest construction company was raised to buy from hold at Berenberg Bank. Berenberg said it has a stronger order book than its European peers.

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