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European Stocks Decline Second Day on U.S. Shutdown, ISM

Frankfurt Stock Exchange
A trader walks across the trading floor below a display of the DAX Index curve at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg

European stocks declined for a second day, as a shutdown of the U.S. government continued and a gauge of service-industry activity in the world’s biggest economy fell more than forecast.

Gerresheimer AG lost 2 percent as Credit Suisse Group AG lowered its recommendation on the shares. Schneider Electric SA fell 3.2 percent. Aviva Plc advanced 1.4 percent as the insurer said it generated $2.6 billion from the sale of its U.S. business. BP Plc rose 1.1 percent after a U.S. appeals court ordered a reconsideration of key terms of a settlement in the 2010 Gulf of Mexico oil spill case.

The Stoxx Europe 600 Index slipped 0.4 percent to 309.55 at the close of trading, the lowest level since Sept. 9. The equity benchmark yesterday fell by the most since Aug. 30. It has still rallied 11 percent this year as central banks around the world pledged to leave interest rates low for a prolonged period.

“The U.S. shutdown will have an impact on economic growth, but it will be limited,” said Pierre Mouton, who helps oversee $6 billion at Notz, Stucki & Cie. in Geneva. “The standoff is a worry because it will continue into the debt ceiling talks. Washington’s masquerade notwithstanding, investors should feel happier about Europe, with its improving economy and cheap valuations.”

Budget Impasse

U.S. President Barack Obama and congressional leaders yesterday failed to break a budget impasse in their first face-to-face negotiations since the government began its first partial shutdown in 17 years on Oct. 1. The standoff raises concern the budget dispute may affect talks to increase the $16.7 trillion debt ceiling by Oct. 17 so as to avoid a default.

The halt has placed as many as 800,000 federal employees on unpaid leave. A partial shutdown lasting one week would probably shave 0.1 percentage point from economic growth, according to the median estimate of economists in a Bloomberg survey, with the costs accelerating if the closure persists.

The Institute for Supply Management’s U.S. non-manufacturing index fell to 54.4 in September from 58.6 the prior month, the Tempe, Arizona-based group said today. The median forecast in a Bloomberg survey called for a drop to 57. Estimates of the 75 economists ranged from 55 to 59.

In China, the non-manufacturing purchasing managers’ index rose to 55.4 in September from 53.9 in August, the National Bureau of Statistics and Federation of Logistics and Purchasing said in Beijing. That’s the highest level since March. Readings above 50 signal expansion.

National Indexes

National benchmark indexes retreated in 14 of the 18 western European markets. The U.K’s FTSE 100 added 0.2 percent, while France’s CAC 40 fell 0.7 percent. Germany’s DAX fell 0.4 percent, with the volume of shares traded 46 percent lower than the 30-day average as many businesses closed for the Unity Day holiday.

The volume of shares changing hands in Stoxx 600-listed companies was 11 percent lower than the 30-day average, data compiled by Bloomberg show.

Gerresheimer declined 2 percent to 44.68 euros. Credit Suisse downgraded the producer of pharmaceutical and health-care equipment to neutral from outperform, similar to buy, saying the shares are nearing the brokerage’s 12-month price estimate of 46 euros. Gerresheimer closed at 45.60 euros yesterday.

Schneider fell 3.2 percent to 60.46 euros, contributing the second-most to the Stoxx 600’s retreat. Exane BNP Paribas SA cut the world’s biggest maker of low- and medium- voltage power gear to neutral, the equivalent of hold, from outperform.

Aviva Gains

Aviva climbed 1.4 percent to 413.1 pence after saying the sale of its U.S. life-insurance and annuities business to Apollo Global Management LLC’s Athene Holding Ltd. generated proceeds of $2.6 billion, higher than the $1.8 billion purchase price disclosed in December. Earnings and other improvements in the U.S. company’s surplus increased the value, Aviva said.

BP advanced 1.1 percent to 437.15 pence as the U.S. Court of Appeals asked District Judge Carl Barbier to review his interpretation of some of the terms of a settlement reached with spill victims’ lawyers in 2012.

The oil company said the program’s administrator was approving payment of millions of dollars in “fictitious” losses based on a flawed interpretation of the agreement. The appelate panel also asked Barbier to stop some payments until he can sort out who has legitimate claims.

K+S AG, a German potash producer, gained 2.9 percent to 19.15 euros. Russia has told bidders for Suleiman Kerimov’s 22 percent stake in OAO Uralkali that the world’s biggest potash maker should resume cooperation with its Belarusian rival, Dow Jones reported late yesterday, citing unidentified people close to the discussions.

The $20 billion potash market was “paralyzed” after the two companies ended a joint venture in July, Potash Corp., North America’s largest fertilizer producer, said in September.

Schibsted ASA rallied 6.6 percent to 337.20 kroner, its highest price since at least 1992, after Goldman Sachs Group Inc. began coverage of Norway’s biggest media group with a buy rating, citing earnings-growth potential for its online classifieds business.

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