Most Europe Stocks Drop on Economy Concern; Nestle Falls

Feb. 14 (Bloomberg) -- Most European stocks declined as reports showed the economies of the euro area and Japan shrank in the fourth quarter, outweighing a decrease in American jobless claims.

Nestle SA, the world’s largest food company, fell the most since April after reporting the slowest sales growth in three years. Renault SA and ABB Ltd. jumped at least 5.5 percent after reporting earnings that beat estimates. Man Group Plc rose for an eighth day, its longest streak of gains in 12 years.

The Stoxx Europe 600 Index retreated 0.2 percent to 287.79 at the close, paring an earlier drop of as much as 0.6 percent, as releases showed the economies of Germany, France and Italy all contracted more than estimated. More than two shares on the gauge retreated for every one that climbed. The equity benchmark has still rallied 2.9 percent this year.

“The weaker German data is weighing on shares,” Guillermo Hernandez, who helps manage about $664 million as head of trading at FPM Frankfurt Performance Management AG, wrote in a message. “Germany is supposed to be the European locomotive. It is not catastrophic yet, but it leaves investors more cautious.”

Euro area gross domestic product fell 0.6 percent in the fourth quarter from the previous three months, the European Union’s statistics office in Luxembourg said. That exceeded the 0.4 percent median estimate in a Bloomberg survey.

Germany, Japan

The German economy, Europe’s largest, shrank 0.6 percent in the fourth quarter, while French GDP fell 0.3 percent. Italy’s economy shrank 0.9 percent. All contractions exceeded the median forecasts of economists.

In Japan, GDP dropped an annualized 0.4 percent, following a revised 3.8 percent decline in the previous quarter, the Cabinet Office said. The median forecast of 32 economists surveyed by Bloomberg News called for 0.4 percent growth.

Stocks pared losses after a U.S. Labor Department report showed fewer Americans than projected filed applications for unemployment benefits last week. Jobless claims decreased by 27,000 to 341,000 in the week ended Feb. 9. The median forecast in a Bloomberg survey called for 360,000 claims.

National benchmark indexes fell in 13 of the 18 western European markets. Germany’s DAX dropped 1.1 percent, while the U.K.’s FTSE 100 slid 0.5 percent and France’s CAC 40 retreated 0.8 percent.

Nestle dropped 2.3 percent to 63 Swiss francs. The company said its sales excluding acquisitions, disposals and currency changes increased 5.9 percent in 2012. That was less than the 6 percent average estimate of 11 analysts in a Bloomberg survey.

Britvic, Bankia

Britvic Plc lost 7.1 percent to 390 pence, a 10-week low. The U.K. distributor of Pepsi was downgraded at Societe Generale SA, JPMorgan Chase & Co. and Barclays Plc. A.G. Barr Plc called off its planned acquisition of Britvic yesterday after the Office of Fair Trading referred the deal to the Competition Commission.

Bankia SA, the lender recently ejected from Spain’s benchmark IBEX 35 Index, slumped 12 percent to 41 euro cents. The bank will convert bonds to equity at 1 euro cent per share as part of its reorganization, Expansion reported.

Separately, FROB, the country’s fund for bank restructuring, said its investment in Bankia will involve a reduction in the nominal value of the lender’s share capital, leading to losses for existing shareholders.

Renault Profit

Renault advanced 7.7 percent to 46.50 euros, its biggest gain since September 2011. France’s second-largest carmaker said earnings before interest, taxes and one-time items totaled 729 million euros ($971.5 million). That beat the 698 million-euro average estimate in a Bloomberg survey.

The lender also said the automotive unit’s net cash position was 1.49 billion euros at the end of 2012, compared with net debt of 299 million euros a year earlier.

ABB rose 5.6 percent to 20.81 francs, its biggest advance in 18 months, after reporting earnings that surpassed analyst estimates. The world’s largest maker of power transformers said it will continue to focus on cutting costs this year amid an uncertain economic outlook.

Man Group climbed 2.3 percent to 111.1 pence amid reports Britain’s biggest publicly traded hedge-fund manager may be bought. The Independent said the company was the subject of “a vague bid rumor,” while the Daily Mail also reported the company may become a takeover target. Neither newspaper identified where they got the information from.

BNP Savings

BNP Paribas SA gained 2 percent to 46.75 euros. The bank plans to reduce its annual cost base by 2 billion euros by 2015. BNP plans to increase its dividend to 1.50 euros a share from 1.20 euros a year earlier.

KBC Groep NV, Belgium’s biggest bank and insurer by market value, jumped 6.5 percent to 30.16 euros, the highest price since February 2011. KBC reported fourth quarter underlying profit of 309 million euros, which exceeded estimates of 281.3 million euros, and raised its dividend to 1 euro.

Anheuser-Busch InBev NV rose 5.9 percent to 69.59 euros, its biggest jump in 18 months. The world’s biggest brewer offered to cede full control of Corona distribution in the U.S. to Constellation Brands Inc. for $2.9 billion. This is part of its bid to salvage its purchase of Grupo Modelo after U.S. regulators had sued to block the deal.

Electricite de France SA advanced 5 percent to 14.95 euros. Europe’s biggest power generator after announcing plans to cut costs and raise its dividend.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net