European stocks dropped by the most in three weeks as a report showed German manufacturing unexpectedly contracted this month, while Cyprus’s President worked on a new plan to obtain a bailout from the euro area.
Lanxess AG fell the most in 17 months after predicting lower first-quarter earnings before interest, taxes, depreciation and amortization than in the previous year. SAP AG, the biggest maker of business-management software, dropped 2.1 percent. Brenntag AG climbed by the most since December after the chemical distributor reported full-year results that beat analysts’ estimates.
The Stoxx 600 retreated 0.7 percent to 294.47 at the close in London. The equity benchmark has still risen 5.3 percent this year as reports on U.S. payrolls and Chinese exports bolstered confidence in the global economic recovery and central banks continued their stimulus measures.
“Investors have come back a bit on Cyprus and the immediate impact it may have on the broader euro zone and have concluded that Cyprus alone isn’t enough to re-ignite a crisis,” Norman Villamin, who helps oversee $64 billion as European chief investment officer at Coutts & Co. in Zurich, said. “But we look at the tools and the approach being taken and think it’s really making any future problems much more risky for euro-zone policy makers to handle.”
National benchmark index fell in all 18 western-European markets. France’s CAC 40 slid 1.4 percent, while the U.K.’s FTSE 100 lost 0.7 percent. Germany’s DAX declined 0.9 percent.
A purchasing managers’ index for Germany’s manufacturing industry unexpectedly fell to 48.9 this month. The median economist forecast had called for a reading of 50.5, according to a Bloomberg News survey. A separate report showed that manufacturing in France contracted more than estimated.
“The French indices disappoint again, and also the German numbers are very unsatisfactory,” Ulrich Wortberg, an analyst at Helaba Landesbank Hessen-Thueringen in Frankfurt, wrote in a note to clients.
Cyprus’s President, Nicos Anastasiades, met advisers to draft a new plan to avoid financial collapse after lawmakers rejected the euro area’s proposed levy on bank deposits.
The alternative plan may include a new version of the deposit tax, said an official who asked not to be identified citing government policy. The central bank declared that lenders will remain shut for another two days, effectively preventing Cypriots from accessing their accounts until March 26.
The European Central Bank said it will withdraw Cypriot banks’ access to emergency funds on March 26 if the government fails to agree to a bailout from the European Union and the International Monetary Fund.
“The Governing Council of the European Central Bank decided to maintain the current level of Emergency Liquidity Assistance, ELA, until Monday, 25 March 2013,” the ECB said in a statement. “Thereafter, ELA could only be considered if an EU/IMF program is in place that would ensure the solvency of the concerned banks.”
Lanxess slumped 6 percent to 58.31 euros after predicting that Ebitda will drop to as little as 160 million euros ($207 million) in the current quarter. The chemical maker said it has budgeted for declining profit in 2013.
SAP dropped 2.1 percent to 62.96 euros after Oracle Corp. reported sales and profit that missed analysts’ estimates. The U.S. enterprise software maker said its corporate customers reduced their spending on software. Cap Gemini SA, France’s biggest computer-services company, slid 3.9 percent to 36.97 euros.
A gauge of European carmakers posted the worst performance of the 19 industry groups in the Stoxx 600, with Renault SA slipping 5.1 percent to 51.04 euros and Daimler AG retreating 2.2 percent to 43.96 euros.
Brenntag increased 3.4 percent to 117.75 euros after the chemical distributor reported full-year adjusted operating Ebitda of 717 million euros, beating the average analyst estimate of 712.9 million euros.
EON AG gained 4.2 percent to 13.71 euros and RWE AG added 2.9 percent to 29.73 euros after Germany’s most powerful Social Democratic state leader called for the country’s government to reduce the tax on electricity bills by 25 percent. Hannelore Kraft, the SPD prime minister of North Rhine-Westphalia challenges Chancellor Angela Merkel for popularity in polls. A gauge of European utilities climbed 1.1 percent.
Deutsche Bank AG rose 0.8 percent to 32.70 euros after co-Chief Executive Officer Anshu Jain said the bank’s first-quarter revenue was in line with last year, while expenses would contribute positively.